Dow drops more than 300 points on fears that Fed will raise interest rates by 1%

Reporters reported that the Dow Jones Index today (September 20) at 9:00 pm Thai time, the Dow Jones Industrial Average was at 30,647.42 points, down 372.26 points or 1.2%, with all stocks falling. Before the Federal Reserve (Fed) begins its monetary policy meeting on 20-21 September.

The CME Group’s FedWatch Tool indicates that investors weigh 82% that the Fed would raise interest rates by 0.75% to 3.00-3.25% at its September 20-21 meeting, and give 18% weight to the Fed’s hike. interest rate 1.00%

If the Fed raises interest rates by 0.75% in September, it will raise interest rates by 0.75% for the third time after raising interest rates by 0.75% in June and July. And if the Fed raises interest rates by 1.00%, it will be the biggest rate increase in 40 years.

Research organization CFRA said that if the Fed were to raise interest rates by more than 0.75% at its meeting this week, it would be too tight a monetary policy. and will cause the Wall Street stock market to collapse.

“We think a 1% interest rate rise will create panic in the market. And it shows that the Fed is overreacting to economic data. and reduce the chances of a gradual economic slowdown,” CFRA analyst Sam Stowall said in the report.

Of the 56 post-World War II interest rate hikes, the Fed raised interest rates by 1% just seven times, and after that rate hike, the S&P 500 fell 2.4% in a month, down 1.3% after 3 months and recovered by 0.1 % in 6 months

In addition, Wall Street trading today was weighed down by a jump in US Treasury yields. amid those forecasts the Fed will raise interest rates by 0.75-1.00% at this week’s monetary policy meeting.

The yield on the two-year US Treasury is sensitive to the Fed’s monetary policy. It jumped above 3.9 percent to its highest since 2007 today and is well above the 10-year and 30-year US Treasury yields.

Short-term bond yields bounce higher than long-term As a result, the US bond market has an inverted yield curve, which is a sign of recession. In the midst of the Fed’s accelerating rate hike

US Treasury yields rebounded. After the United States revealed inflation numbers that rose more than expected. This will be a factor that supports the Fed to accelerate interest rate increases.

According to a CNBC poll, Wall Street analysts predicted that the Fed will continue to raise interest rates until they reach their maximum level. and will maintain the interest rate at this level for some time The Fed will use a “hike and hold” interest rate measure instead of the previously anticipated “hike and cut” measure.

The survey results showed that Analysts expect the Fed to raise interest rates by 0.75% after the end of its meeting tomorrow (September 21), and will continue to raise rates until it reaches 4.26 percent in March 2023 Expected for the Fed to keep interest rates at that level for almost 11 months, the average of analysts who expect the Fed to maintain interest rates for three months to two years.

In addition, analysts say there is a 52 percent chance that the US economy will face a recession over the next 12 months. Because the Fed’s use of monetary policy is too tight.

At the same time, analysts say the Fed will take several more years. Before it managed to manage inflation to its target of 2%, the Consumer Price Index (CPI) was expected on an annual basis. It will remain at 6.8% at the end of 2022 and 3.6% at the end of 2023, before falling to the Fed’s target of 2% in 2024.

Revealing the US economic numbers today. The US Commerce Department said home construction starts jumped 12.2 percent in August to 1.575 million, the highest level in two months, and exceeded analysts’ expectations of 1.445 million from 1.404 million in February.

The number of new home building businesses increased more than expected in August. Despite the impact of rising prices of building materials and the rebound in mortgage interest rates

However, housing permits fell 10.0% to 1.517 million units in August.

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