Last week, stock prices on global markets fell as it became increasingly clear that due to elevated inflation, central bank interest rates will reach higher levels than previously expected and remain at those levels longer than anticipated.
On Wall Street, the Dow Jones fell 3 percent to 32,816 points, while the S&P 500 slid 2.7 percent to 3,970 points, and the Nasdaq index dropped 3.3 percent to 11,394 points.
After a strong rise in January, the indices lost some of those gains in February as hopes faded that the U.S. central bank would soon end its cycle of interest rate hikes.
All recent data shows that the U.S. economy is very resilient to the Fed’s aggressive interest rate increases.
Last week, it was reported that in the fourth quarter of last year, the U.S. gross domestic product (GDP) grew by 2.7 percent, slightly below analysts’ expectations, but still solid.
It was also reported that last week the number of initial claims for unemployment benefits unexpectedly fell, indicating that the labor market remains strong.
Additionally, inflation and consumption data continue to exceed analysts’ expectations, suggesting that inflationary pressures could remain elevated for a longer period than previously anticipated.
As a result, it is now estimated that the Fed will raise interest rates at least two or three more times, to 5.35 percent by July, and that these levels will be maintained until next year.
Not long ago, investors hoped that the Fed’s key interest rate could remain below 5 percent and that the Fed would begin a cycle of rate cuts by the end of the year.
European stock prices also fell last week. The London FTSE index slid 1.6 percent to 7,878 points, while the Frankfurt DAX fell 1.8 percent to 15,209 points, and the Paris CAC dropped 2.2 percent to 7,187 points.
