Dow futures fell more than 300 points today amid concerns that the US Federal Reserve’s (Fed) interest rate hike will push the US economy into recession.
At 6:03 pm Thai time, the Dow Jones Industrial Average fell 355 points or 1.18% to 29,794 points.
The Dow is expected to drop for a fourth day today and is likely to drop for a fifth in six weeks.
The Dow is down 2.4% since the start of the week. and is now close to this year’s lowest level set in June. The S&P 500 and Nasdaq were down 3 percent and 3.3 percent, respectively.
Steve Hanks, professor of economics at Johns Hopkins University, said there was an 80 percent chance the US economy would go into recession. If the Fed continues its balance sheet cuts (QT).
said Mr Hank The Fed has fueled inflation by injecting huge amounts of money into the system since 2020, driving prices higher. This is because consumers are willing to pay more for purchases.
The CNBC survey found that analysts and fund managers had predicted a 52 percent chance that the US economy would enter a recession over the next 12 months.
The yield on the two-year US Treasury bond, which is sensitive to the Federal Reserve’s monetary policy, rose above 4.2 percent on the day 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.
The Fed has voted to raise the short term interest rate by 0.75% to 3.00-3.25 percent this session. He also noted that the Fed will continue to raise interest rates until it reaches 4.6% in 2023.
In its policy interest rate forecast (Dot Plot), Fed officials do not expect any rate cuts until 2024. This caused the long-term interest rate to drop to 2.9%.
Fed officials predict interest rates will reach 4.4 percent at the end of the year and 4.6 percent at the end of 2023, before slowing to 3.9 percent in 2024 and flat at 3.9 percent in 2025. The long-term interest rate is 2.5% .
Investors expect the Fed will continue to raise interest rates in the remaining two meetings this year. After removing the signal from the Dot Plot and Fed Chairman Jerome Powell’s statements
said Mr Powell He will not consider a rate cut until he is confident that inflation figures are falling towards the Fed’s target of 2%.
In addition, Mr. Powell warned that Carrying out the mission of controlling inflation can affect the expansion of the US economy and the labor market.
Investors expect the Fed to raise interest rates by 0.75% at its monetary policy meeting in November. and increased by 0.50% in December
If the Fed raises such interest rates as expected. This will lead to the Fed raising interest rates by 0.75% four times in a row at the June, July, September and November meetings. Meanwhile, the Fed’s policy rate will hit 4.25-4.50% by the end of the year. And it will keep the interest rate above 2.50%, the level the Fed considers neutral. neither too relaxed nor too strict
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 results of the survey showed that Analysts expect the Fed to continue raising interest rates until it reaches 4.26 percent in March. The Fed is expected to keep interest rates at that level for almost 11 months, the average of analysts who expect the Fed to hold interest rates for three 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.
