On Wall Street on Thursday, stock prices fell sharply again, already the sixth trading day in the last seven, as central banks around the world raise interest rates to curb inflation and therefore increase the risks of recession.
The Dow Jones slipped 741 points or 2.42 percent, to 29,927 points, while the S&P 500 sank 3.25 percent to 3,666 points and the Nasdaq index 4.08 percent to 10,646 points. After rising the day before, Wall Street fell sharply again yesterday as the world's central banks raise interest rates due to high inflation, which raises risks of a recession.
On Wednesday, the US Federal Reserve raised interest rates by as much as 0.75 percentage points, the largest one-off increase in the price of money since 1994. Therefore, they are now in the range of 1.5 to 1.75 percent, which is their highest level since March 2020 and the outbreak of coronary heart disease.
This is followed by further increases in interest rates, given that inflation is at its highest level in 40 years, above 8.5 percent, so that, according to Fed leaders, interest rates could reach 3.4 percent by the end of the year, the highest level since 2008.
years. Fed leaders believe that the economy will avoid a recession despite a sharp rise in interest rates, but they have significantly reduced estimates of economic growth this year - from the previous 2.8 to 1.7 percent.
Not everyone believes Fed
But not everyone is convinced that the Fed will be able to ‘softly ground’ the economy.
Wells Fargo Bank analysts believe there is now a 50 percent chance that a recession will occur soon. Many other banks, including Deutsche Bank and Morgan Stanley, warn that the risks of a recession are growing. "That's what investors are thinking about now - the possibility of a recession and whether the company's earnings will be in line with analysts' estimates or will fall," said Tom Hainlin, a strategist at U.S.
Bank Wealth Management’s Ascent Private Wealth Group. Yesterday, the day after the Fed, interest rates were raised by the Swiss central bank, for the first time in 15 years, saying it was less concerned about the strengthening of the Swiss currency and higher inflation.
For the fifth session in a row, the British Central Bank increased interest rates yesterday. Therefore, investors fear that the efforts of central banks to curb inflation could lead to a sharp slowdown in world economic growth, and even a recession. Because of all this, the S&P 500 loss index has been around 23 percent since the beginning of the year.