Although central banks in Western countries are raising interest rates, global stock markets saw indices rise last week, primarily due to a correction in stock prices after three weeks of sharp declines.
On Wall Street, the Dow Jones rose 2.7 percent last week to 32,151 points, while the S&P 500 jumped 3.6 percent to 4,067 points, and the Nasdaq index increased by 4.1 percent to 12,112 points.
Strong Inflation Control
Indices rose sharply, even though leaders of the U.S. central bank are not easing their strong rhetoric on controlling inflation. Fed Chairman Jerome Powell reiterated last week that the Fed is ‘strongly committed’ to controlling inflation and will continue to tighten monetary policy until that goal is achieved. Charles Ewans, president of the Fed branch in Chicago, supported Powell, stating that controlling inflation is a priority.
It is therefore clear that the Fed will continue to aggressively raise interest rates to curb inflation, which is hovering around its highest levels in over 40 years. The Fed has been raising rates since March and will further increase them at the two-day meeting on September 20 and 21.
A new, third consecutive increase of 0.75 percentage points is expected, bringing rates to a range of 3 to 3.25 percent. It is also estimated that by the end of the year, rates could reach 3.7 percent, and by March next year, 4 percent.
Despite this, stock prices on the largest stock exchange in the world have risen sharply, which analysts say is a result of price corrections following their sharp decline in the previous three weeks.
– It is not surprising that such a rebound occurred as much of it is technical in nature. I would not be surprised if the market strengthens further at the beginning of next week, and then gradually eases until the consumer price report is released – says Jack Janasiewicz, a strategist at Natixis Investment Managers Solutions.
