A man shelters under an umbrella as he walks past the London Stock Exchange in London, Britain, August 24, 2015. REUTERS/Suzanne Plunkett/File PhotoShares fall after Powell comments, HK and China closedLONDON, June 22 - The financial markets took a sharp intake of breath on Thursday as the Bank of England lobbed an interest rate "grenade" at Britain's inflation problem with a big rate hike after Fed chief Jerome Powell had also backed more U.S. rate increases.
With bond market borrowing costs going up again "the fear is that this could rapidly tip the economy into a recession". Markets, though, remain unconvinced, pricing in a 72% probability of a 25 bps hike next month, but no further hikes after that, according to the CME FedWatch tool. Powell speaks for a second day again later.The dollar was barely changed on the day and Kevin Cummins, chief economist at NatWest Markets, said Powell's testimony on Wednesday had not shed any new light on the Fed's thinking or the likely future path for monetary policy.
"The next six months, as much as we would like to stop talking about the Fed, it's going to be the continued driver of sentiment in the market," said Michael Dyer, investment director, multi assets at M&G Investments.The S&P 500 index
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