The Wall Street experts hope that the Federal Reserve avoids a fourth consecutive 75bp and Biden says the U.S economy will avoid a recession.
For the past 10 months, the U.S. federal reserve has been in a continuous battle for the sole purpose of taming inflation. Yet, despite the hard efforts, the September producer price report came higher than the Dow estimation.
In September, wholesale prices in the United States increased by 0.4%, which was double the figure given by Dow specialties. Over the past 12 months, the producer price index rose by 8.5%, a 0.2% decline from August’s PPI report. The Dow estimation says that September PPI will increase by 0.2%, yet the recent data shows a plus of 0.2%.
As of Wednesday’s mid-session, Wall Street had delivered a mixed performance. The S & P 500 was up by 0.2% and the Nasdaq slumped by 0.07%. The Dow Jones industrial average rose by 0.22%.
The struggle on Wall Street is obvious to everyone amid fears of higher interest hikes in the next meeting.
The energy sector in the U.S posted better gains in the past two months, supporting its likelihood of a price increase. According to the PPI report, energy prices rose by 0.7% in September, and the probability of higher increases just went through the roof.
The OPEC members are holding an opposite attitude towards the Biden administration and have decided to cut oil production. In the Eurozone, the probability of recession is increasing as we speak, and the U.S. allies are reconsidering their posting towards Biden’s administration.
The FED has implemented five interest hikes; the last three hikes were at a rate of 75bp. Experts believe that the market can’t take a fourth consecutive 75bp.
The Wall Street main index is already in a bear market and some believe that the stocks could tumble by another 20%.
According to the director of monetary and capital markets at the international monetary fund, Tobias Adrain, stocks might decline by another 20% in the next few months.
Tobias Foracts may appear to be an extreme prediction in some ways, but the market and the direction and conflict in the United States support its readings.
The U.S and China’s conflict has returned to the surface after the U.S.’s new stunt in the semiconductor industry. It appears that the U.S. has provided the green light for two non-Chinese chip-making companies that operate in China to receive restricted goods.
This action might cause a negative reaction in China and could potentially damage the chip manufacturing industry. The conflict between China and the U.S on the subject of domination of the semiconductor industry is escalating, and fears of reaching the point of no turning back are rising.
That said, the Federal Reserve aims for restrictive territory and remains committed to higher interest rates for as long as it says. Furthermore, according to his latest speech, U.S. President Joe Biden noted that a recession will hit the American economy and that if it comes, it will last only a short time.