Investors were concerned about the speed of monetary policy tightening after Federal Reserve Chair Jerome Powell indicated the central bank is “fully committed” to lowering inflation.
The Dow Jones Industrial Average fell 227 points, or 0.72%, on the day. The S&P 500 sank 0.77%, while the Nasdaq Composite fell 0.92%.
The European Central Bank boosted key interest rates by an unprecedented 75 basis points and signalled more increases, putting the battle against inflation ahead of the bloc’s economy, even as the bloc’s economy is expected to enter a winter slump.
Meanwhile, Federal Reserve Chair Jerome Powell stated that the Fed must act “directly” on inflation.
“History warns strongly against hasty policy relaxation,” he added. Long-term inflation expectations have been constant thus far, but Powell warned that this is not a guarantee. “What we aspire to achieve is a period of growth below trend,” which will allow the labour market to rebalance, he said.
