ASX set to edge lower as global rate rises hit Wall Street

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Britain’s central bank raised its key interest rate by another half-percentage point. Switzerland’s central bank raised its benchmark lending rate by its biggest margin to date, 0.75 percentage points, and said it couldn’t rule out more hikes. Central banks in Norway and the Philippines also raised interest rates.

The Fed and other central banks are raising interest rates in to make borrowing more expensive. The goal is to slow economic growth enough to tame inflation, but not so much that economies slip into a recession. Wall Street is worried that the Fed may be pumping the brakes too hard on an already slowing economy, which makes steering into a recession more likely.

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On Wednesday, Fed chair Jerome Powell stressed his resolve to lift rates high enough to drive inflation back toward the central bank’s 2 per cent goal. Powell said the Fed has just started to get to that level with this most recent increase. The U.S. central bank lifted its benchmark rate, which affects many consumer and business loans, to a range of 3 per cent to 3.25 per cent. That is the fifth rate hike this year and up from zero at the start of the year.

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The Fed also released a forecast known as a “dot plot” that showed it expects its benchmark rate to be 4.4 per cent by year’s end, a full point higher than envisioned in June.

Companies are closing in on the end of the third quarter and preparing for the next big round of earnings reports, though some early reports have trickled out. Homebuilder Lennar rose 2.6 per cent after reporting strong financial results for its fiscal third-quarter. Fellow homebuilder KB Home fell 4 per cent after a warning about supply chain problems and a mixed financial report.

AP

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