Interest rate worries to give shares a rocky ride
Sunday 22 August 1999
Alan Greenspan, the chairman of the Federal Reserve, is expected to raise rates by 0.25 percentage points to 5.25 per cent at Tuesday's meeting of the Federal Open Market Committee. But analysts fear the rise will leave the door open for more tightening and create further uncertainty for the stock markets.
Ian Morris, US economist with HSBC in London, said that recent data on the labour market and wage growth will justify a pre-emptive tightening. But he dismissed fears of a 0.5 percentage point hike, saying there was "no need to panic" as inflation was "incredibly well-behaved".
"The on-going strength in the economy and larger-than expected rises in hourly earnings, second-quarter employment-cost index and unit labour costs should mean the FOMC decides to act pre-emptively again."
Stephen Lewis, chief economist at Monument Derivatives, said hopes of a single 0.25 percentage point rise were "far too sanguine". "The FOMC will probably be reluctant to raise the funds rate target more than 0.25 [percentage points] from fear of setting off an avalanche of foreign capital out of US dollar assets," he said. "But this rate hike is unlikely to be the last in the series when there is such strong evidence of excessive domestic demand."
The Fed has made it clear that it has been closely monitoring economic data. A survey of the last 39 releases of data since their last meeting shows 21 were hawkish, 12 dovish and six neutral.
Fears that interest rates are set to rise have knocked stock markets around the world. The FT SE-100 has fallen more than 7 per cent since its all-time high of 6,620 on 6 July. The Dow Jones is currently 3 per cent below its peak of 11,200 on 12 July this year. Markets in Asia and continental Europe have also suffered.
- 3 The enemy within: People who hear voices in their heads are being encouraged to talk back
- 4 Phil Neville backtracks on Tomas Rosicky 'I'd smash him' comments from Match of the Day 2
- 5 British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Paris attacks: Do not call Charlie Hebdo killers 'terrorists', BBC says
UK weather: Snow to fall in the coming week with sub-zero temperatures to last until early February
Asteroid narrowly scrapes past Earth: how to watch the closest space rock for decades as it flies by
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Prince Philip set to be knighted by Australia: Celebrate by reading his greatest gaffes
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
British Muslim school children suffering a backlash of abuse following Paris attacks
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...