How the world is reacting to Jerome Powell’s interest rate hike

Powell said on Tuesday that the Fed was ready to raise rates in a big way if economic data showed that tougher measures are needed to control rising prices.

The comments were his first since data showed inflation unexpectedly jumped in January and the US government reported an unusually large increase in payroll jobs for the month.

Following Powell’s remarks, here’s how the world reacted:

• Wall Street stocks were the first to tumble on Tuesday.
• The Dow Jones Industrial Average closed down about 575 points, or 1.7%, at 32,856.46.
• The broad-based S&P 500 added 1.5% to 3,986.37, while the tech-rich Nasdaq Composite Index fell 1.3% to 11,530.33.
• European markets also turned red. The pan-European STOXX 600 index declined 0.77% and MSCI’s broadest measure of stocks around the world was down 1.46%.
• MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.81% lower, while Japan’s Nikkei rose 0.25%.
• Australian shares fell 1% on Wednesday, weighing on commodity stocks. The S&P/ASX 200 index snapped four sessions of gains and was down 1% at 7,294.3.
• New Zealand’s benchmark S&P/NZX 50 index closed down 0.4% at 11,872.76.
• Canada’s main stock index fell more than 1%. The Toronto Stock Exchange’s S&P/TSX Composite Index was down 239.26 points, or 1.2%, at 20,275.54, its lowest level since last Wednesday.
• Oil prices fell more than 3% on a stronger dollar and concerns about a slump in demand.
• US crude fell 3.58% to $77.58 a barrel and Brent settled at $83.29, down 3.35% on the day.
• Gold declined against the strength of the dollar. Spot gold fell 1.8% to $1,814.48 an ounce.
• The greenback rose against a basket of world currencies to its highest since early January as Powell signaled a Fed hike to rein in inflation.

Big US Fed hike

The US central bank has already raised its benchmark lending rate eight times since the beginning of last year, as it battles inflation that remains above its long-term target of two percent.

It last month raised rates by a quarter percentage point to 4.50-4.75 per cent, the highest level since the global financial crisis.

Powell’s comments raise the prospect of the Fed raising rates by 50 basis points at its next meeting, scheduled for March 21-22.

US job creation surged in January, with employers adding more than half a million new jobs and pushing the unemployment rate to its lowest level since the 1960s.

US debt ceiling pressure

At Tuesday’s hearing, Powell also faced questions about the ongoing debt ceiling negotiations between the Biden administration and Republicans in Congress.

The United States touched its $31.4 trillion borrowing limit in January, triggering frantic negotiations between Congress and the White House to raise the limit and allow the US to meet pre-existing spending commitments.