Washington Magazine

The indication from the United States central bank of a pending initiative to tackle a surge in COVID-linked inflation has sent shocking waves across the global stock markets with values taking fright. The Federal Reserve recently notified financial markets of the intention to start increasing interest rates in a sustained fashion from March. There was also reaffirmation of the bond purchase programme coming to an end in the same month, with attention turning to taming the pace of price rises.

Inflation has surged across the globe, reaching 7% in the US in December, representing the highest level for four decades, with the phenomenon attributed to unprecedented spikes in energy costs and supply chain disruption.

Analysts have issued warnings of the increased prospect of a sustained period of volatility for values, stating that the Fed’s remarks have spooked markets, especially as Fed funds futures are now priced in more than four rate increases in 2022. However, the International Monetary Fund (IMF) warns that increasing US rates could lead to damaging knock-on effects for emerging economies, due to rising cost of debt servicing on the back of a likely stronger dollar.

The conclusion of Fed chair Jay Powell had effect across the globe, with Stocks plunging in Asia overnight to a 15-month low with Japan’s Nikkei diving by 3%. European markets also experienced falls that were more muted that the 3% earlier predicted. There were also dips in France, Germany, Italy and Spain, even as the prospect of rising US rates continue to drive Wall Street stocks from record. The S&P 500 is already down by almost 9% in the year to date with the Nasdaq slumping by 13%.

Ipek Ozkardeskaya, senior analyst at Swissquote, expressed his opinion on the response of the market: “Jerome Powell didn’t really sooth investors’ nerves at yesterday’s policy statement. He said that the Federal Reserve won’t refrain from back-to-back rate hikes to get the inflation situation straight. His words sent the US stocks lower, and the US dollar higher.”

“Apparently, the recent market rout hasn’t given cold feet to Powell and the Fed members, meaning that they are ready to take on more losses on the equities front to get inflation under control.”

For more information, please visit https://newvisioninvestment.com/.

Media Contact
Company Name: New Vision Investment Ltd
Contact Person: Shaun Pembrooke
Email: Send Email
Phone: +353.14854039
Address:17/39 Portview House Thorncastle Street
City: Dublin
Country: Ireland
Website: https://newvisioninvestment.com/