Rand slumps after Fed rate warning
Inflation remains elevated
Investors had been eagerly awaiting fresh signals about when the Fed might pause its rate-tightening cycle.
Stock markets tumbled, oil prices fell and the dollar firmed on Tuesday as Federal Reserve Chair Jerome Powell warned that the central bank could step up its rate hike campaign to fight inflation.
By Tuesday evening, the rand lost almost 2% to R18.56/$. Much weaker-than-expected growth data also weighed on the local currency.
Investors had been eagerly awaiting fresh signals about when the Fed might pause its rate-tightening cycle.
But Powell said in prepared remarks before two days of testimony in Congress that the central bank "would be prepared to increase the pace of rate hikes" following strong economic economic data.
The Fed and other central banks worldwide have been hiking rates in efforts to tame decades-high inflation, but the policy could also tip economies into recession.
"A big sigh of disappointment has rippled through stock markets as investors once again are jolted by the realisation that the work of the Federal Reserve, in trying to tame wild inflation in the US, is far from over," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The Fed raised rates by 25 basis point last month after a half-point increase in December that followed a series of three-quarter hikes.
"We will stay the course until the job is done," Powell said in the statement.
While analysts are betting on the United States and other major economies possibly avoiding recession despite inflation remaining elevated, there are concerns over China after the world's second-biggest economy set a lower-than-expected target for its growth this year.-Fin24
By Tuesday evening, the rand lost almost 2% to R18.56/$. Much weaker-than-expected growth data also weighed on the local currency.
Investors had been eagerly awaiting fresh signals about when the Fed might pause its rate-tightening cycle.
But Powell said in prepared remarks before two days of testimony in Congress that the central bank "would be prepared to increase the pace of rate hikes" following strong economic economic data.
The Fed and other central banks worldwide have been hiking rates in efforts to tame decades-high inflation, but the policy could also tip economies into recession.
"A big sigh of disappointment has rippled through stock markets as investors once again are jolted by the realisation that the work of the Federal Reserve, in trying to tame wild inflation in the US, is far from over," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The Fed raised rates by 25 basis point last month after a half-point increase in December that followed a series of three-quarter hikes.
"We will stay the course until the job is done," Powell said in the statement.
While analysts are betting on the United States and other major economies possibly avoiding recession despite inflation remaining elevated, there are concerns over China after the world's second-biggest economy set a lower-than-expected target for its growth this year.-Fin24
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