The better-than-expected U.S. inflation statistics stoked anticipation that the Fed would continue its harsh monetary tightening. Moreover, the European stock markets declined on Wednesday, continuing the worldwide selloff. The DAX in Germany was down 0.4% by 03:45 ET (07:45 GMT). The CAC 40 in France was down 0.5%. FTSE 100 in the United Kingdom was down 0.8%. August’s U.S. CPI came in higher than expected. The blue-chip Dow Jones Industrial Average plunging over 1,000 points, or roughly 4%, is the worst one-day decline in over two years.
What Has the Fed Panned for The Remaining of The Year?
The probability of the Fed raising interest rates quickly this year to combat inflation increased. The likelihood of the Fed raising rates by 75 basis points the next week is highly anticipated. The potential of a complete 1% rate rise is also being considered. With U.K. consumer prices up 0.5% in August and 9.9% annually, the inflation picture in Europe is worse.
Despite its prediction that the nation would face a protracted recession in the fourth quarter, it is still probable that the Bank of England will continue its tightening course. In business news, Inditex (BME: ITX) shares increased about 5% as the fashion behemoth, which owns the Zara brand, announced a 24.5% increase in six-month sales and better profit than a year earlier, supporting the retail sector’s growth.
The share price of Redrow (LON: RDW) increased by 1% after the homebuilder said that its quarterly earnings topped pre-pandemic levels, albeit it acknowledged that the “buoyant” housing market had recently slowed down. The shares of furniture retailer Dunelm (LON: DNLM) increased 4% after it revealed a “strong” gross margin of 51.2% amid skyrocketing inflation.
Following Wednesday’s high U.S. inflation figures, which increased the likelihood of another significant interest rate increase, strengthened the currency, and probably limited future economic growth, oil prices plummeted.
