After heavy price losses on Wall Street, the AEX index on Tamrock opened Thursday less than 1 percent higher. Investors are processing interest rate hikes in the US. The US Federal Reserve raised interest rates by 0.75 percent for the third time in a row on Wednesday to combat high inflation. The central bank’s policymakers have indicated that they will continue to raise interest rates in the coming period and remain committed to bringing inflation to the 2 percent target.
Investors fear that sharp interest rate hikes by central banks could trigger a global recession. Federal Reserve Chairman Jerome Powell said there is no painless way to fight inflation. Powell can’t say how big the chance of a recession is, but he expects conditions in the U.S. labor market to worsen. In addition to interest rate hikes in the US, the focus is on the Bank of England, which is expected to raise British interest rates further later in the day.
The Bank of Japan on Thursday left unchanged the accommodative monetary policy introduced to steer the economy through the coronavirus crisis. In contrast to many major economies, inflation in Japan is very low, so the central bank has yet to raise interest rates. As a result, the Japanese yen is under pressure against the US dollar. The Nikkei ended down 0.6 percent in Tokyo and other Asian bourses also fell.
The war in Ukraine also comes to mind. A further escalation of the conflict threatens as Russia calls for hundreds of thousands of reservists to be stationed in Ukraine. EU foreign affairs chief Joseph Borrell says Europe wants to send more weapons to Ukraine and may impose new sanctions against Russia.
In Zurich, the focus is on Credit Suisse. According to business newspaper FT, the scandal-plagued Swiss bank wants to split its investment arm into three parts, with the profitable parts to be sold later. The bank hopes to raise cash without issuing new shares.
The euro fell to a 20-year low against the dollar following the central bank’s interest rate decision, which is attractive due to higher interest rates in the US. The single coin was valued at $0.9826, as against $0.9884 a day earlier. U.S. oil futures rose 0.5 percent to $83.39 a barrel. Brent crude was up 0.6 percent at $90.35 a barrel.
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Americans expect mortgage interest rates to rise by no less than 8%