Fed raising interest rates
The US Fed has increased the key interest rate by 0.75 percent on Wednesday. This is the biggest jump in interest rate in 28 years. Along with this, the Fed has also reduced America’s growth forecast for the years 2022 and 2023. However, the Fed says that there will be no recession in the country. Federal Reserve Chairman Jerome Powell has indicated further interest rate hikes. According to Jerome Powell, the Fed may raise rates again by 0.75 in July. He also said that the Fed has the necessary solutions to bring inflation under control. Let us tell you that inflation in America is at the highest level in 40 years.
Foreign investors sell off
The data shows that foreign investors (FPIs) have sold equities worth Rs 19,2104 crore so far this calendar year. This includes selling of Rs 24,949 crore by FPIs so far in June. Caesar Maasry of Goldman Sass warned: “Emerging markets may see exits and underperformance in the next 3 months.” VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said continuous selling of FPIs is a big setback for Dalal Street.
Due to the big fall in the global markets, the Nifty is also seeing a decline. Most Asian stocks have lost their gains due to the fear of recession. After the Fed’s decision, there was a jump in the US stock market, but after this, Dow futures were seen trading with a fall of 1.2 percent. Chinese stocks also closed with a fall. While the UK’s blue chip FTSE 100 fell 0.5 per cent due to the possibility of a hike in interest rates at the Back of England policy meeting. However, Japan’s Nikkei closed with a gain of 0.4 percent after four consecutive days of decline.
Market experts are concerned whether the Fed’s rate hike plan will be able to control inflation and or lead to a recession. Dr VK Vijayakumar said that at present no one knows whether rising rates will lead the US economy into recession. According to a survey report earlier this week, the US economy could see a slowdown next year due to the Fed raising interest rates to control the fastest inflation in 40 years.