The Federal Reserve could further increase its interest rates as the fight against inflation continues. Although share prices in the United States fell, analysis shows the market can still withstand an additional increase in interest rates.
Possibility Of Increase In Interest Rates
Most stocks in the U.S. recorded a decline as the possible increase in interest rates that Fed’s executives warned traders about seems nearer.
Meanwhile, James Bullard, the President of the St. Louis Federal Reserve, claims that traders now understand an October increase in bank rates is inevitable, as he remains confident the rates will surge. That has resulted in a 2.7% decline in S&P 500 shares.
Also, on Thursday, the 2Q Personal Consumption Expenditure (PCE) number was better than anticipated, encouraging the Fed to hike the rates further. Similarly, the labor market remains tight as the weekly unemployment rate hit a record 5-month low.
The recent fall in Apple Inc. stock price dragged the Nasdaq 100 to a 3.4% dip. Also, analysts from Bank of America predicted that the demand for iPhone and other Apple products would likely decline. Further, the 10-year yield surged by 3.7%, while the US treasuries slightly fell from gains recorded the previous day.
The UK Reports
In Uk, PM Liz Truss defended the unfunded tax freeze policy, which caused the recent unrest in the stock market. The UK government bonds, however, surged as investors failed to buy Truss’s justification.
The Bank of England proposes support for their debts as traders are not convinced as they notice the possible risks associated with the conflicting actions by the apex banks recently. Also, the Asia government is ready to boost its currency recovery from the recent decline in value.
According to Shawn Snyder, the chief of the investment strategy unit of Citi US, the stock market is adjusting as it becomes glaring that an economic meltdown could occur. He further mentioned the UK market crisis and the fall in Pound Sterling. He also noted the threat posed by all he said earlier, coupled with the spoilt Nord Stream pipelines, increases anxiety.
Meanwhile, Loretta Mester, the President of the Cleveland Federal Reserve, also warned about the possibility of a surge in interest rates as the fear of recession increases. Also, the two economic measures, combined with others that the US authorities use to determine the possibility of economic meltdown, show signs of recession.
The Chief Investment Officer of UBS Global Wealth Management, Mark Haefele, believes that the only way to prevent further interest rate increases is when traders start acknowledging that inflation is now under control. He, however, added that it might take time to actualize.