Jakarta, CNBC Indonesia – The benchmark New York Stock index opened lower in today’s trading, Thursday (5/5/2022).
The Dow Jones index fell 0.9% while the S&P 500 and Nasdaq Composite fell 1.1% and 1.6%, respectively.
Wall Street seems to be reversing in this trade after successfully darting in yesterday’s trading with an appreciation of almost 3% for the Dow Jones and S&P 500.
The rally that occurred in the US stock market occurred after the central bank The Fed announced monetary policy for the month of May.
The Fed decided to raise the benchmark interest rate by 50 basis points (bps). Although the increase of 50 bps is the highest increase in the last two decades, market players have anticipated this policy.
The Fed, which raised the benchmark Federal Funds Rate (FFR) interest rate by half a percent, was actually judged that the most powerful central bank in the world had kept its promise.
The main trigger behind the aggressive rate hike by the Fed was because the US experienced the highest increase in inflation in the last 4 decades.
Apart from being anticipated by market participants, the Fed’s boss Jerome Powell also said he was not actively considering an increase in the benchmark interest rate to 75 bps.
Meanwhile in the government bond market, the yield on the 10-year US Treasury rose again and surpassed the psychological level of 3%.
After the Fed, it is now the turn of the British central bank, the Bank of England (BoE), to raise its benchmark interest rate by 25 bps.
The market participants had anticipated this increase. Given the absence of surprises in policy-making, the stock market may rebound.
The tightening measures taken by the BoE were also triggered by the same problem, namely the high inflation rate.
In March, the UK reported its consumer price index as a measure of inflation rose 7% from a year earlier.
Inflation in the UK is also not much different from the US. In March 2022, the increase in inflation in Queen Elizabeth’s Country reached its highest level in the last 3 decades.
With this increase in the benchmark interest rate, the BoE has tightened 4 times. However, with clear communication and a commitment to tame inflation without triggering a recession, the market responded positively.
CNBC INDONESIA RESEARCH TEAM
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