US stocks sink after Federal Reserve chair Jerome Powell admitted a “soft landing” for the economy is unlikely
The Federal Reserve represented by its chair Jerome Powell delivered its latest monetary policy announcement. The central bank hiked interest rates by 75 basis point again and admitted it would more difficult than expected for the Fed to tame inflation.
Wall Street lost all hope for the pivot as Mr Powell explained it is too early to speak about a “pause” in rate hikes. Although increases may slow their pace in December (e.g. fall to 50 basis points), the Fed is determined to continue hiking rates for quite a while.
The understanding of slim chances of a so-called “soft-landing” scenario where rate hikes don’t cause recession sent the US stock market down. The Dow ended the day down more than 500 points (1.6%). Meanwhile, S&P 500 and Nasdaq Composite lost 2.5% and 3.4%, respectively.
A recent CNN poll revealed that 75% of Americans think the economy is already in a recession. Back in the summer, only 64% of the respondents thought so.
Besides, the Fed itself is still worried about surging consumer prices and will be watching all the upcoming reports to make informed decisions. Therefore, CPI reports, labour reports, and the ongoing impact of China’s zero-COVID policy on global growth are the factors to track for all those wishing to predict the next market and federal moves.