The stock indices of New York opened the trading session this Thursday (22) in decline, with investors still assimilating the effects of yesterday’s decision by the Federal Reserve.
At around 11:10 am, the Dow was down 0.35%, the S&P 500 was down 0.63% and the Nasdaq was down 1.01%.
Higher interest for longer is the norm
Wall Street traders deal with the indigestible message of fed: once the tightening cycle is completed, interest rates are not expected to decline anytime soon. Caersten Menke, head of finance at Julius Baer, points out that the base interest rate could reach 4.4% by the end of 2022, with room for a residual adjustment of 0.2% in 2023.
The last time the rate reached 4.4% was 14 years ago, at the height of the subprime financial crisis.
The Fed forecasts another rate hike for its November meeting, with the magnitude of 0.50 percentage point the most likely, according to institutional investors at the Fed funds. The 0.75 percentage point option, on the other hand, cannot be ruled out, as the tightening cycle takes on the contours of a “turbulent landing” for the world’s largest economy. In other words, a recession may be the price to be paid to fight the inflation widespread, which today exceeds 8% per year.
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