Global stocks fall after the Federal Reserve signaled tightening of monetary policy

Global stocks and crude oil fell after the Federal Reserve indicated that tighter monetary policy may come earlier than expected, as the US central bank expects a marked rise in inflation this year.

Japan’s Topix fell 0.6 percent and Australia’s S&P/ASX 200 index slipped 0.3 percent in Asia-Pacific trade Thursday. Wall Street’s S&P 500 futures fell 0.3 percent, while London’s FTSE 100 futures fell 0.5 percent.

The weakness in stock markets came after the Federal Reserve kept its key interest rate unchanged at 0 to 0.25 percent on Wednesday. But the consensus among Fed officials has shifted toward a Price hike in 2023, driven by previous forecasts for 2024 at the earliest.

Core inflation is expected to be 3 percent this year, sharply higher than the 2.2 percent expected in March, according to estimates by Fed officials.

US Treasury yields, which rise as prices fall, settled after jumping In the wake of the Federal Reserve’s announcement. US 10-year Treasury yields settled at 1.579 per cent in Asian trading after rising by 0.1 percentage point in the previous session. The Standard & Poor’s 500 Index closed 0.5 percent lower on Wednesday.

Jay Powell, Federal Reserve Chairman, said there was “every reason to believe we would be in a job market with very attractive numbers, with low unemployment, high participation, and high wages across the spectrum.”

The FOMC also maintained the asset purchase program, which was introduced last year to cushion the economic blow from Covid-19, Unchanged at $120 billion Per month. The process for ending the program would be “orderly, systematic and transparent,” Powell said, adding that any changes would be noted “in advance.”

“We don’t think downsizing will create appreciable pressures on the economy or markets,” said Rick Rieder, chief global fixed income investment officer at BlackRock. “The biggest risk today will be the overheating model where it is difficult to predict how high input costs or wages will rise.”

Stocks in China, where interest rates are rising driven streams From global investors seeking better returns, they ignored the Fed’s announcement. The CSI 300 index of shares listed in Shanghai and Shenzhen rose 0.3 percent after data showed that new home prices across the country rose steadily in May. Hong Kong’s Hang Seng is little changed.

Expectations of policy tightening also weighed on oil prices, with Brent crude, the international benchmark, down 0.4 percent to $74.12 a barrel. The US West Texas Intermediate fell the same degree to $ 71.86 a barrel.

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