Global stock markets plunge after Federal Reserve chief Powell's statem

Washington: The economic figures that have emerged in the last few days indicate a stronger economy than expected. Therefore, Federal Reserve chief Jerome Powell warned that the increase in interest rates in the near term could be higher than previously estimated. Powell’s statement has strongly impacted the global stock market, and several indices have seen a fall. The Hang Seng, one of Asia’s leading stock indices, fell by nearly two and a half per cent. South Korea’s Kospi fell by 1.3 per cent.

Over the last few months, the global economy has been in a recession-like environment. Many leading organizations, including the International Monetary Fund, World Bank, United Nations, World Trade Organization and companies in the financial sector, have predicted that a recession will hit in the year 2023. It is said that the increase in interest rates by major world countries is a major reason for this. The United States, Europe and other leading countries have consistently supported interest rate hikes to curb inflation. Last month, the US Federal Reserve, the European Central Bank and the Bank of England announced an increase in interest rates. The interest rate in the United States reached 4.75 per cent as the Federal Reserve increased by 0.25 per cent. But the Federal Reserve had said that after this increase, the rate hikes would slow down and the increase would be nominal. However, Powell appeared to have changed his stance in a hearing before the US Congress on Tuesday.

Moreover, Powell claimed in front of the Senate panel that the data showing that the economy is stronger has come out and may also increase the inflation index. The head of the Federal Reserve also said that the interest rate would be further increased to prevent inflation, which will be higher than the previous estimate. So far, the Federal Reserve has raised interest rates eight times in the past year. This includes growth from 0.75 per cent to 0.25 per cent. The next rate hike was said to be nominal after last month’s increase of 0.25 per cent. But Powell’s statement signals that the increase is big.

Over the past year, it has emerged that if the dollar’s interest rate increases, it adversely affects other countries’ economies. Therefore, Powell’s statement is a new blow to international investors. It hit the global stock market. Most of the indices in Asia and Europe fell. This includes leading indices in China, Japan, South Korea, Germany, France, the United Kingdom, and Australia.

Inflation had hit record highs in many Western countries, including the United States. The rising inflation has hit the common people hard and it has come to light that a ‘Cost of Living Crisis’ has arisen in many countries. Western countries blamed the inflation and subsequent problems on the Russia-Ukraine conflict and the Covid pandemic. However, many economists and analysts have repeatedly pointed out that the wrong policies of these countries are responsible for this.

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