Investors across the globe are worried that aggressive rate hikes by the Fed will overshoot the U.S. stocks.
As markets had their worst month since the start of the pandemic 2020, U.S. stocks ended the day lower on Friday. Investors’ fear-mongering over the recession.
The S&P 500 was down 1.51%, the NASDAQ Composite was down 1.73 percent, and the Dow Jones Industrial Average was down 1.65% on Friday.
Since the pandemic began in March 2020, September has been the Dow Jones Industrial’s worst performing month. The three indices also had their lowest first nine-month performance in 20 years.
To calm down the rapidly surging inflation numbers, the Federal Reserve Bank of America aggressively hiked the interest rates. Investors across the globe worried that aggressive rate hikes by the fed will overshoot the market and tip the economy into a prolonged recession that was unwanted. The Fed is determined to cool down inflation aggressively, knowing that its actions may hurt economic growth in the short run.
Lael Brainard, the vice chair of the Federal Reserve, stressed the urgent need to control inflation and warned that the policy will need to be restrictive for some time. She said, “For these reasons, we are committed to avoiding pulling back prematurely.”
The Fed raised rates by 0.75 points earlier this month. This was for the third time in a row, pushing the benchmark rate from 3% to 3.25%. Rising rates cooled off the housing market and changed the behavior of the consumer, as reported by a number of companies including CarMax (NYSE: KMX), which said sentiment and inflation were pressuring sales of used cars.
