Reporters reported The Dow Jones Index continues to decline. It fell more than 600 points recently, dropping off the 30,000 line amid concerns that the Federal Reserve’s overly tight monetary policy will put the US economy on the brink of recession.
Furthermore, the market has also been under pressure from S&P. Global has revealed the Purchasing Managers Index (PMI), the leading manufacturing and services sector in the United States, contracted for a third month.
At 23:38 GMT, the Dow Jones Industrial Average was 29,377.88, down 698.80 or 2.32%, while the S&P 500 and Nasdaq were both down 2.22%.
All the shares fell today. Led by energy stocks after the collapse in oil prices.
The Dow is expected to close for a fourth day today and is likely to drop for a fifth week in six weeks.
The Dow is down 2.4% since the start of the week. and is now close to this year’s lowest level set in June. The S&P 500 and Nasdaq fell 3% and 3.3% respectively.
Steve Hanks, a professor of economics at Johns Hopkins University, said there was an 80% chance of the US economy going into recession. If the Fed continues budget cuts (QT).
“The Fed has been fueling inflation by injecting huge amounts of money into the system since 2020, driving prices up. because consumers are willing to pay more for their purchases ”. Mr. Hank said
A CNBC poll found that analysts and fund managers had predicted a 52% chance that the US economy would go into recession in the next 12 months.
The two-year US Treasury yield is sensitive to the Fed’s monetary policy. Today it jumped above 4.2%, reaching a 15-year high and well above 10-year and 30-year US Treasury yields. .
Short-term bond yields rebounded higher than long-term ones. As a result, the US bond market has an inverted yield curve, signaling a recession.
The Fed voted to raise the short-term interest rate from 0.75% to 3.00-3.25% this session. He also signaled that the Fed will continue to raise interest rates to reach 4.6% in 2023.
However, in its Dot Plot forecasts, Fed officials do not foresee rate cuts until 2024. It will bring the long-term interest rate down to 2.9%
Fed officials expect interest rates to reach 4.4% at the end of the year and 4.6% at the end of 2023, before slowing to 3.9% in 2024 and stabilizing at 3.9% in the year. 2025. The long-term interest rate is 2.5%.
Investors Expect It The Fed will continue to raise interest rates in the remaining two meetings this year. After removing the signal from the Dot Plot and the statements by Fed President Jerome Powell
said Mr. Powell He will not consider a rate cut until he is sure that inflation data falls towards the Fed’s 2% target.
Also, Mr. Powell warned him Fulfilling the mission of controlling inflation Can affect the expansion of the US economy and labor market.
Investors expect the Fed to raise interest rates by 0.75% during the November monetary policy meeting. and increase another 0.50% in December if the Fed raises the interest rate as expected. This will result in the Fed raising interest rates by 0.75% four times in a row in June, July, September and November meetings. Meanwhile, the Fed’s official rate will reach 4.25-4.50% by the end of the year. And it will keep the interest rate above 2.50%, the level the Fed considers neutral. without being too relaxed or too strict
According to a CNBC poll, Wall Street analysts predicted that The Fed will continue to raise interest rates until they hit the highest level. and will keep the interest rate at this level for some time. The Fed will use a “hike and hold” interest rate measure instead of the previously planned “hike and cut” measure.
The survey results indicated that Analysts expect the Fed to continue raising interest rates to reach 4.26% in March. The Fed is expected to hold interest rates at that level for nearly 11 months, the average of analysts who expect the Fed to hold interest rates for three to two years.
Additionally, analysts say there is a 52% chance that the US economy will face a recession in the next 12 months. Due to the Fed’s too restrictive use of monetary policy.
At the same time, analysts say the Fed will take many more years. Before it managed to control inflation at its 2% target, the consumer price index (CPI) was forecast on an annual basis. It will remain at 6.8% at the end of 2022 and 3.6% at the end of 2023, before falling to the 2% target set by the Fed in 2024.
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