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Tag: Central bank interest rates

  • EXPLAINER: How will we know if the U.S. is in recession?

    EXPLAINER: How will we know if the U.S. is in recession?

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    WASHINGTON — The U.S. economy grew faster than expected in the July-September quarter, the government reported Thursday, underscoring that the United States is not in a recession despite distressingly high inflation and interest rate hikes by the Federal Reserve.

    But the economy is hardly in the clear, and the solid growth reported for the third quarter did little to alter the growing conviction among economists that a recession is very likely next year.

    Higher borrowing rates and chronic inflation will almost certainly continue to weaken consumer and business spending. And likely recessions in the United Kingdom and Europe and slower growth in China will erode the revenue and profits of American corporations. Such trends are expected to cause a U.S. recession sometime in 2023.

    Still, there are reasons to hope that a recession, if it comes, will prove a relatively mild one. Many employers, having struggled to find workers to hire after huge layoffs during the pandemic, may decide to maintain most of their existing workforces even in a shrinking economy.

    In the July-September quarter, the economy accelerated to a 2.6% annual pace, after two quarters of contraction. Consumers spent more and exports jumped, offsetting a sharp slowdown in home sales and construction.

    Six months of economic decline is a long-held informal definition of a recession. Yet nothing is simple in a post-pandemic economy in which growth was negative in the first half of the year but the job market remained robust, with ultra-low unemployment and healthy levels of hiring. The economy’s direction has confounded the Fed’s policymakers and many private economists ever since growth screeched to a halt in March 2020, when COVID-19 struck and 22 million Americans were suddenly thrown out of work.

    By far the biggest threat to the economy remains inflation, which is still near its highest level in four decades. Even for workers who received sizable raises, their pay has dropped once it’s adjusted for inflation. The pain is being felt disproportionately by lower-income and Black and Hispanic households, many of whom are struggling to pay for essentials like food, clothes, and rent.

    High inflation has also become a central issue in Republican attacks on President Joe Biden and his fellow Democrats, who have been thrown on the defensive as they seek to maintain control of Congress in the midterm elections.

    So what is the likelihood of a recession? Here are some questions and answers:

    ————

    WHY DO MANY ECONOMISTS FORESEE A RECESSION?

    They expect the Fed’s aggressive rate hikes and persistently high inflation to overwhelm consumers and businesses, forcing them to slow their spending and investment. Businesses will likely also have to cut jobs, causing spending to fall further.

    The Fed is poised to keep raising its benchmark interest rate after having already hiked it five times this year, from near zero to a range of 3% to 3.25%. Fed officials have projected that their short-term rate, which affects borrowing costs for consumers and businesses, will reach about 4.6% next year, which would be the highest level since late 2007.

    Consumers have been remarkably resilient so far this year. Still, there are signs that high inflation and borrowing costs have begun taking a toll. Last quarter, consumer spending grew at just a 1.4% annual rate, according to Thursday’s government report, down from 2% in the second quarter and less than half its pace of a year ago.

    Thursday’s figures also showed that businesses are cutting back on investment in buildings and factories, and the housing market has been hammered by rising mortgage costs. Those trends are expected to intensify, leading to a likely recession.

    ———

    WHAT ARE SOME SIGNS THAT A RECESSION MAY HAVE BEGUN?

    The clearest signal, economists say, would be a steady rise in job losses and a surge in unemployment. Claudia Sahm, an economist and former Fed staff member, has noted that since World War II, an increase in the unemployment rate of a half-percentage point over several months has always resulted in a recession.

    Many economists monitor the number of people who seek unemployment benefits each week, which indicates whether layoffs are worsening. Weekly applications for jobless aid have increased in recent months, but not by very much. Instead, employers have added a robust average of 370,000 jobs in the past three months.

    ———

    ANY OTHER SIGNALS TO WATCH FOR?

    Many economists monitor changes in the interest payments, or yields, on different bonds for a recession signal known as an “inverted yield curve.” This occurs when the yield on the 10-year Treasury falls below the yield on a short-term Treasury, such as the 3-month T-bill. That is unusual. Normally, longer-term bonds pay investors a richer yield in exchange for tying up their money for a longer period.

    Inverted yield curves generally mean that investors foresee a recession that will compel the Fed to slash rates. Inverted curves often predate recessions. Still, it can take 18 to 24 months for a downturn to arrive after the yield curve inverts.

    Ever since July, the yield on the two-year Treasury note has exceeded the 10-year yield, suggesting that markets expect a recession soon. And just this week, the three-month yield also temporarily rose above the 10-year, an inversion that has an even better track record at predicting recessions.

    ———

    WHO DECIDES WHEN A RECESSION HAS STARTED?

    Recessions are officially declared by the obscure-sounding National Bureau of Economic Research, a group of economists whose Business Cycle Dating Committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

    The committee considers trends in hiring as a key measure in determining recessions. It also assesses many other data points, including gauges of income, employment, inflation-adjusted spending, retail sales and factory output. It puts heavy weight on jobs and a measure of inflation-adjusted income that excludes government support payments like Social Security.

    Yet the NBER typically doesn’t declare a recession until well after one has begun, sometimes for up to a year.

    ———

    DON’T A LOT OF PEOPLE THINK WE”RE ALREADY IN A RECESSION?

    Yes, because many people now feel much more financially burdened. With wage gains trailing inflation for most people, higher prices have eroded Americans’ spending power.

    And the Fed’s rate hikes have helped send the average 30-year fixed mortgage rate surging above 7% this week, the highest level in two decades. It has more than doubled from about 3% a year ago, thereby making homebuying increasingly unaffordable.

    ———

    DOES HIGH INFLATION TYPICALLY LEAD TO A RECESSION?

    Not always. Inflation reached 4.7% in 2006, at that point the highest in 15 years, without causing a downturn. (The 2008-2009 recession that followed was caused by the bursting of the housing bubble).

    But when it gets as high as it has this year — it reached a 40-year peak of 9.1% in June — a downturn becomes increasingly likely.

    That’s for two reasons: First, the Fed will inevitably sharply raise borrowing costs when inflation gets that high. Higher rates then drag down the economy as consumers are less able to afford homes, cars, and other major purchases.

    High inflation also distorts the economy on its own. Consumer spending, adjusted for inflation, weakens. And businesses grow uncertain about the future economic outlook. Many of them pull back on their expansion plans and stop hiring, which can lead to higher unemployment as some people choose to leave jobs and aren’t replaced.

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  • US stock indexes are mixed as Facebook parent company slumps

    US stock indexes are mixed as Facebook parent company slumps

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    NEW YORK — Stock indexes are mixed on Wall Street in afternoon trading Thursday as more big companies report quarterly results.

    The S&P 500 fell 0.5% as of 2:11 p.m. Eastern. Roughly 70% of stocks within the benchmark index gained ground, but slides in several big technology stocks more than offset hose gains.

    The tech-heavy Nasdaq fell 1.5%. Facebook’s parent company, Meta Platforms, plummeted 23.7% after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. It joins other tech and communications stocks, such as Google’s parent company, Alphabet, and Microsoft, in reporting weak results and worrisome forecasts over advertising demand.

    The Dow Jones Industrial Average rose 263 points, or 0.8%, to 32,099. Construction equipment maker Caterpillar jumped 8.2% and contributed greatly to the index’s gains after it handily beat analysts’ third-quarter profit forecasts.

    Long-term Treasury yields fell. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.95% from 4.01% late Wednesday. The two-year yield fell to 4.34% from 4.42%.

    “What you’re seeing is a little bit of relief,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “Earnings are not great but they’re not awful either.”

    The benchmark S&P 500 is still holding on to weekly gains and remains solidly on track to end October in the green.

    Earnings have been the big focus for Wall Street this week, but markets got some encouraging economic news Thursday as the government reported the U.S. economy returned to growth last quarter, expanding 2.6%. That marks a turnaround after the economy contracted during the first half of the year.

    The economy has been under pressure from stubbornly hot inflation and the Federal Reserve’s efforts to raise interest rates in order to cool prices. The central bank is trying to slow economic growth through rate increases, but the strategy risks going too far and brining on a recession.

    The rising interest rates have made borrowing more difficult, particularly with mortgage rates. Average long-term U.S. mortgage rates topped 7% for the first time in more than two decades this week.

    The latest economic data is being closely watched for any signs of a slowdown or that inflation might be easing as Wall Street tries to determine if and when the Fed might pull back on its interest rate increases.

    The central bank is expected to raise interest rates another three-quarters of a percentage point at its upcoming meeting in November. But traders have grown more confident that it will dial down to a more modest increase of 0.50 percentage points in December, according to CME Group.

    Central banks around the world have also been raising interest rates in an effort to tame inflation. The European Central Bank piled on another outsized interest rate hike on Thursday. Markets in Europe were mixed.

    Wall Street has more earnings to review later Thursday. Internet retail giant Amazon and iPhone maker Apple report results after the market closes. Exxon Mobil will report its latest financial results on Friday.

    ———

    Joe McDonald and Matt Ott contributed to this report.

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  • European Central Bank makes another large interest rate hike

    European Central Bank makes another large interest rate hike

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    FRANKFURT, Germany — The European Central Bank piled on another outsized interest rate hike aimed at squelching out-of-control inflation, increasing rates Thursday at the fastest pace in the euro currency’s history and raising questions about how far the bank intends to go with a recession looming over the economy.

    The 25-member governing council raised its interest rate benchmarks by three-quarters of a percentage point at a meeting in Frankfurt, matching its record increase from last month and joining the U.S. Federal Reserve in making a series of rapid hikes to tackle soaring consumer prices.

    The ECB has now raised rates for the 19-country euro area by a full 2 percentage points in just three months, distance that took 18 months to cover during its last extended hiking phase in 2005-2007 and 17 months in 1999-2000.

    Central banks around the world are rapidly raising interest rates that steer the cost of credit for businesses and consumers. Their goal is to halt galloping inflation fueled by high energy prices, post-pandemic supply bottlenecks, and reviving demand for goods and services after COVID-19 restrictions eased. The Fed raised rates by three-quarters of a point for the third straight time last month.

    Quarter-point increases have usually been the norm for central banks. But that was before inflation spiked to 9.9% in the eurozone, fueled by higher prices for natural gas and electricity after Russia cut off most of its gas supplies during the war in Ukraine. Inflation in the U.S. is near 40-year highs of 8.2%, fueled in part by stronger growth and more pandemic support spending than in Europe.

    Inflation robs consumers of purchasing power, leading many economists to pencil in a recession for the end of this year and the beginning of next year in both the U.S. and the 19 countries that use the euro as their currency.

    Markets will be watching ECB President Christine Lagarde’s news conference for clues about how far the bank intends to go.

    Analysts at UniCredit said Lagarde was not likely to provide clues about the peak level of rates but “we suspect that she will drop hints pointing to an increasing likelihood that rates will have to be raised into restrictive territory, and a slower pace of hikes following today’s bold move.”

    At the last meeting in September, she indicated that three-quarters of a point was not the “norm” but added that decisions are being taking on a meeting-to-meeting basis. Some analysts foresee a half-point increase at the last rate-setting meeting of the year in December and think the bank may pause after that.

    The ECB foresees inflation falling to 2.3% by the end of 2024.

    Higher rates can control inflation by making it more expensive to borrow, spend and invest, lowering demand for goods. But the concerted effort to raise rates has also raised concerns about their impact on growth and on markets for stocks and bonds. Years of low rates on conservative investments have pushed investors toward riskier holdings such as stocks, a process that is now going into reverse, while rising rates can lower the value of existing bond holdings.

    The head of the International Monetary Fund, Kristalina Georgieva, has warned that tightening monetary policy “too much and too fast” raises the risk of prolonged recessions in many economies. The IMF forecasts that global economic growth will slow from 3.2% this year to 2.7% next year.

    The ECB’s benchmark for short-term lending to banks now stands at 2%, a level last seen in March 2009.

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  • Stocks end higher on Wall Street, notching weekly gains

    Stocks end higher on Wall Street, notching weekly gains

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    NEW YORK — Wall Street capped a volatile run for stocks with a broad rally Friday, contributing to sizable weekly gains for major indexes.

    The S&P 500 rose 2.4% and notched its biggest weekly gain since June. The Dow Jones Industrial Average rose 2.5% and the Nasdaq composite ended 2.3% higher.

    More than 90% of the stocks in the benchmark S&P 500 index rose. Technology stocks, retailers and health care companies powered a big share of the rally. Oracle rose 5%, Home Depot added 2.3% and Pfizer rose 4.8%.

    Social media companies fell broadly after Snapchat’s parent company issued a weak forecast and the Washington Post reported that Elon Musk plans to slash about three-quarters of the payroll at Twitter after he buys the company. Snap slumped 28.1% and Twitter shed 4.9%.

    Markets have been unsettled in recent days, as stocks lurched from sharp gains early in the week to losses later in the week. The market appeared headed for another sell-off early Friday, then reversed course amid fresh signals from the Federal Reserve that it may consider easing up on its aggressive pace of interest rate hikes as it tries to bring down inflation.

    “The hope is that they at least slow down,” Jay Hatfield, CEO of Infrastructure Capital Advisors.

    The Fed is expected to raise interest rates another three-quarters of a percentage point at its upcoming meeting in November. Markets have been unsettled partly because investors have been hoping that any sign of inflation easing or economic growth slowing could signal that the Fed will ease up on its rate increases, which have yet to show any signs of significantly impacting inflation.

    Mary Daly, president of the Federal Reserve Bank of San Francisco, said Friday that she’s thinking about the dangers of raising interest rates too high and doing too much damage to the economy.

    While the Fed likely isn’t yet ready to start dialing down the size of its rate hikes, she said, “I think the time is now to start talking about stepping down. The time is now to start planning for stepping down.”

    If the Fed does come out of its meeting next month with a fourth straight increase of 0.75 percentage points to its key overnight interest rate, as most investors expect, she said: “I would really recommend people don’t take that away as: It’s 75 forever.”

    A 0.75 point jump is triple the size of the Fed’s usual move, and the Fed risks creating a recession if it moves too high or too quickly.

    Daly’s comments helped push down investors’ expectations for how high the Fed will hike rates through the end of the year. Traders are now pricing in just a 45% chance that the Fed will hike rates by 0.75 percentage points next month and again by the same amount in December.

    Just a day ago, they were much more confident about that, pricing in a 75% probability. Instead, traders increasingly see the Fed dialing down to a more modest increase of 0.50 percentage points in December, according to CME Group.

    Daly was speaking at meeting of the University of California-Berkeley’s Fisher Center for Real Estate & Urban Economics’ Policy Advisory Board.

    Central banks around the world have mostly been raising interest rates to fight inflation and much of the focus has been on the Fed. It has raised its key interest rate to a range of 3% to 3.25%. A little more than six months ago, that rate was near zero.

    Even if the Fed does dial down the size of its increases soon, officials at the central bank have also been adamant that they plan to leave rates alone at that high level for a while to continue to slow the economy in hopes of forcing down high inflation.

    “The concern is still that bond yields are heading higher and the Fed is not signaling a pivot,” said Ross Mayfield, investment strategist at Baird. “Until there is a meaningful pivot driven by a drop in inflation, it’s a huge headwind to the market.”

    Treasury yields, which hit multiyear highs this week on expectations of more Fed rate hikes, eased Friday. The yield on the 10-year Treasury note, which affects mortgage rates, slipped to 4.22% from 4.24% late Thursday. The yield on the two-year Treasury, which tends to track investors’ expectations for Federal Reserve action on interest rates, fell to 4.49% from 4.61%.

    Stocks got a boost from the pullback in yields. The S&P 500 rose 86.97 points to 3,752.75. The index posted a 4.7% gain for the week.

    The Dow climbed 748.97 points to close at 31,082.56, and the Nasdaq added 244.87 points to 10,859.72.

    Small company stocks also gained ground. The Russell 2000 index rose 37.85 points, or 2.2%, to finish at 1,742.24.

    Investors have shifted their focus, for now, to the latest round of corporate earnings as they look for more clues about how hot inflation and rising interest rates are shaping the economy. Reports from airlines, banks, railroad operators and others have so far provided mixed financial results and forecasts.

    American Express fell 1.7% after setting aside hundreds of millions of dollars to cover potential losses as the economy continues to deteriorate. Railroad CSX rose 1.7% after reporting solid financial results.

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  • Asian stocks fall ahead of US inflation update

    Asian stocks fall ahead of US inflation update

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    BEIJING — European stocks and Wall Street futures gained Thursday while Asian markets fell ahead of U.S. inflation data that investors worry will reinforce Federal Reserve plans for more aggressive interest rate hikes.

    London and Frankfurt advanced. Shanghai, Tokyo and Hong Kong declined. Oil prices advanced.

    Wall Street’s benchmark S&P 500 ended lower Wednesday after inflation in producer prices edged down but still was near a multi-decade high.

    The more closely watched consumer price index was due out later Thursday.

    “A hawkish reaction to the data could add more pressure to stocks,” Anderson Alves of ActivTrades said in a report.

    The Fed and other central banks in Europe and Asia have raised rates by unusually big margins to cool inflation that is at multi-decade highs, but traders are afraid they might tip the global economy into recession.

    In early trading, the FTSE 100 in London gained 0.2% to 6,840.35. The DAX in Frankfurt rose 0.8% to 12,272.20 and the CAC 40 in Paris added 0.5% to 5,845.55.

    On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones Industrial Average were up 0.5%.

    On Wednesday, the S&P 500 gave up 0.3% for its sixth daily decline and the Dow slide 0.1% after a report showed producer price inflation is very hot.

    Prices rose 8.5% in September, down from March’s peak of 11.7%. But prices gained 0.4% compared with August following two months of declines.

    Consumer inflation on Thursday and retail sales data Friday could give a clearer picture of where prices are hottest and how consumers are reacting.

    Minutes from the Fed’s last meeting, released Wednesday, underscored the central bank’s commitment to taming “unacceptably high” inflation.

    The S&P 500 is down 25% so far this year and close to a two-year low.

    In Asia, the Shanghai Composite Index lost 0.1% to 3,016.35 and the Nikkei 225 in Tokyo sank 0.6% to 26,237.42. Hong Kong’s Hang Seng tumbled 1.9% to 16,389.11, its lowest close in more than 11 years.

    The Kospi in Seoul fell 1.8% to 2,162.87 while Sydney’s S&P-ASX 200 gained less than 0.1% to 6,642.60.

    India’s Sensex lost 0.7% to 57,205.89. New Zealand’s benchmark lost 0.5% and Southeast Asian markets also declined.

    In energy markets, benchmark U.S. crude gained 19 cents to $87.64 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oil trading, added 31 cents to $92.67 per barrel in London.

    The dollar strengthened to 146.74 after hitting a 24-year high of 145.85 on Wednesday.

    The dollar’s exchange rate has been rising against other currencies due to the Fed’s rate hikes and recession fears. The yen’s weakness has prompted expectations Japan’s central bank might intervene for a second time to prop up the exchange rate following an intervention in September.

    The euro gained to 97.39 cents from 97.06 cents.

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  • Asian shares extend losses as specter of recession looms

    Asian shares extend losses as specter of recession looms

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    BANGKOK — Asian shares slipped on Monday, with Chinese markets logging moderate losses after they reopened from a weeklong holiday.

    The declines followed yet another dismal end to the week on Wall Street as a strong U.S. jobs report added to worries the Federal Reserve might consider the higher-than-expected hiring data as proof the economy hasn’t slowed enough to get inflation under control. That might mean still more hefty rate hikes that could make a recession more likely.

    A U.S. consumer prices report on Thursday will be one of the biggest factors for markets this week. Investors also are awaiting the latest updates on how companies are dealing with higher prices and interest rate hikes.

    Markets were closed Monday in Tokyo, Taiwan and South Korea. The Hang Seng in Hong Kong fell 2.5% to 17,298.32 while the Shanghai Composite index shed 0.4% to 3,012.58. Bangkok’s SET lost 0.6% and India’s Sensex gave up 1.2%.

    The dollar rose to 145.44 Japanese yen from 145.34 late Friday, adding to pressure on Japan’s central bank to counter the yen’s prolonged slide by adjusting its policy of keeping its benchmark interest rate below zero to fend off deflation.

    Prices have been rising in Japan, pushed higher mainly by global inflation and surging costs for oil and gas, but the Bank of Japan has stuck to its ultra-loose monetary policy while the Fed has pressed ahead with sharp rate hikes. The higher expected returns have pushed the dollar higher against the yen.

    On Friday, the S&P 500 fell 2.8% to 3,639.66. It ended with a 1.5% gain for the week, its first weekly gain in four weeks. The Dow Jones Industrial Average skidded 2.1% to 29,296.79. The Nasdaq tumbled 3.8% to 10,652.40. The Russell 2000 index fell 2.9%, to 1,702.15.

    The government report showing employers hired more workers last month than economists expected might clear the way for the Fed to continue hiking interest rates aggressively, something that risks causing a recession if done too severely.

    Employers added 263,000 jobs last month. That’s a slowdown from the hiring pace of 315,000 in July, but it’s still more than the 250,000 that economists expected.

    Stocks have tumbled over 20% this year from record highs this year on worries about inflation, interest rates and the possibility of a recession.

    The major indexes managed to notch a gain for the week, thanks to a powerful but short-lived rally Monday and Tuesday after some investors squinted hard enough at some weaker-than-expected economic data to suggest the Fed may take it easier on rate hikes. But Friday’s jobs report may have dashed such hopes for a “pivot” by the Fed. It’s a pattern that has been repeated several times this year.

    By hiking interest rates, the Fed is hoping to starve inflation of the purchases needed to keep prices rising even further. The Fed has already seen some effects, with higher mortgage rates hurting the housing industry in particular. But if the rate hikes go too far, that could squeeze the economy into a recession. In the

    Crude oil, meanwhile, had its biggest weekly gain since March. Benchmark U.S. crude jumped 4.7% to settle at $92.64 per barrel Friday. Brent crude, the international standard, rose 3.7% to settle at $97.92.

    Oil prices have surged because big oil-producing countries have pledged to cut production in order to keep prices up. That should keep the pressure up on inflation, which is still near a four-decade high but hopefully moderating.

    On Monday, the U.S. benchmark fell 97 cents to $91.67 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude gave up $1.02 to $96.90 a barrel.

    Beyond higher interest rates, analysts say the next hammer to hit stocks could be a potential drop in corporate profits. Companies are contending with high inflation and interest rates eating into their earnings, while the economy slows.

    The euro was unchanged at 97.36 U.S. cents.

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  • Global stocks mixed ahead of US employment update

    Global stocks mixed ahead of US employment update

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    BEIJING — Global stock markets were mixed Friday ahead of U.S. employment data investors hope will show the economy is weakening and persuade the Federal Reserve to ease off plans for more interest rate hikes.

    London and Frankfurt opened higher. Tokyo and Hong Kong declined. Oil prices rose.

    The future for Wall Street’s S&P 500 index was unchanged after the market benchmark fell Thursday following a private sector report that said U.S. employers hired slightly more workers than forecast in September. That gives ammunition to Fed officials who say more rate hikes are needed to cool the economy and rein in inflation that is at a four-decade high.

    U.S. government data due out Friday are expected to show fewer people were hired compared with previous months. Investors hope that will help persuade the Fed five rate hikes this year are working and it can scale down plans for more.

    “What the market seems to be crying out for is a Fed pivot,” said Robert Carnell of ING in a report. “For its part, the Fed is sticking to its ‘higher for longer’ mantra.”

    In early trading, the FTSE 100 in London gained 0.1% to 7,007.32 and the DAX in Frankfurt added 0.1% to 12,487.27. The CAC 40 in Paris advanced 0.1% to 5,943.54.

    On Wall Street, the future for the Dow Jones Industrial Average was up 0.1%.

    On Thursday, the S&P 500 lost 0.2%. The index is up 4.4% for the week following its best two-day rally in 2 1/2 years. The Dow slid 1.1%. The Nasdaq composite gave up 0.7%.

    In Asia, the Nikkei 225 in Tokyo sank 0.7% to 27,116.11 and Hong Kong’s Hang Seng tumbled 1.5% to 17,740.05.

    The Kospi in Seoul shed 0.2% to 2,232.84 while Sydney’s S&P ASX 200 lost 0.8% to 6,762.80.

    India’s Sensex lost less than 0.1% to 58,213.21. New Zealand and Southeast Asian markets declined.

    The Fed and central banks around the world are focused on extinguishing inflation that is running at multi-decade highs, but investors worry the unusually large and rapid pace of their rate hikes might tip the global economy into recession.

    Strong U.S. hiring is positive for job hunters but a sign of enduring economic strength, which might make the Fed think more rate hikes are needed.

    U.S. government data showed the number of applications for unemployment benefits hit a four-month high last week. That suggests the job market might be cooling.

    Forecasters expect the government to report the economy added 250,000 jobs last month, well below the past year’s monthly average of 487,000 but still a strong number despite inflation and two straight quarters of U.S. economic contraction.

    In energy markets, benchmark U.S. crude gained 56 cents to $89.01 per barrel in electronic trading on the New York Mercantile Exchange. The contract advanced 69 cents on Thursday to $88.45. Brent crude, the price basis for trading international oils, advanced 45 cents to $94.87 per barrel in London. It rose $1.05 the previous session to $94.42.

    The dollar declined to 144.84 yen from Thursday’s 145.07 yen. The euro gained to 98.06 cents from 97.94 cents.

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  • India raises interest rate to 5.90% to tame inflation

    India raises interest rate to 5.90% to tame inflation

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    FILE – Reserve Bank of India (RBI) Governor Shaktikanta Das gestures during a press conference after RBI’s bi-monthly monetary policy review meeting in Mumbai, India, on Feb. 6, 2020. India’s central bank on Friday, Sept. 30, 2022, raised its key interest rate by 50 basis points to 5.90% in its fourth hike this year and said the economies of developing countries were confronted with challenges of slowing growth, elevated food and energy prices, debt distress and currency depreciation. (AP Photo/Rajanish Kakade, File)

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  • India raises interest rate to 5.90% to tame inflation

    India raises interest rate to 5.90% to tame inflation

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    India’s central bank has raised its key interest rate to 5.90% and said developing economy were facing slowing growth, elevated food and energy prices, debt distress and currency depreciation

    NEW DELHI — India’s central bank on Friday raised its key interest rate by 50 basis points to 5.90% in its fourth hike this year and said developing economies were facing challenges of slowing growth, elevated food and energy prices, debt distress and currency depreciation.

    Reserve Bank of India Governor Shaktikanta Das projected inflation at 6.7% in the current fiscal year which runs to next March. June was the sixth consecutive month with inflation above the central bank’s tolerance level of 6%, he said in a statement after a meeting of the bank’s monitoring committee.

    He said the central bank will remain focused on the withdrawal of the accommodative monetary policy.

    The bank’s monetary committee slashed the real economic growth forecast to 7% for the current financial year from 7.2% forecast in August. The economic growth for the first quarter of the next financial year is expected around 6.7%.

    Das said the world has been confronted with one crisis after another, but India has withstood shocks from the coronavirus pandemic and the conflict in Ukraine.

    Das also said the Indian rupee has depreciated by 4% since April against 14% appreciation in the U.S. dollar. “The rupee has fared better than many other currencies” and the Reserve Bank Of India’s foreign exchange reserves umbrella remains strong, he said.

    The Indian rupee has plunged to an all-time low of 81.58 rupees to one U.S. dollar.

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