Recently, the Chairman of the United States Federal Reserve, Jerome Powell, announced an increase in interest rates to tackle the rising inflation concerns in the US economy. Powell acknowledged that while this decision is aimed at long-term benefits, it may bring about challenges in the short term.
Powell stated, “Although higher interest rates, slower economic growth, and weakened job market conditions will help lower inflation, they may also cause hardship for households and businesses. These are the necessary sacrifices to keep inflation in check. Failing to stabilize prices would lead to even greater challenges.”
“Our objective is to adjust our policy position decisively to a level that will be restrictive enough to bring inflation back to the target of 2%,” Powell explained, emphasizing the importance of maintaining a tight policy stance for an extended period to ensure price stability. He highlighted the importance of learning from historical experiences and not easing policy prematurely.
UPDATE | #Japan‘s benchmark Nikkei Stock Average closed down 2.7% in Tokyo. In Southeast Asia, #Singapore‘s Straits Times index and #Thailand‘s SET index were down under 1%.#markets #nikkei225https://t.co/MLLLS06j2p
— Nikkei Asia (@NikkeiAsia) August 29, 2022
After Powell’s statement, several national stock market indexes experienced declines in anticipation of the slowdown in the US economy. Given the US’s significant role in the global economic landscape, challenges faced by the country have a ripple effect on economies of nations that have strong economic ties with the US.
In Japan, the Nikkei 225 index dropped by 2.66% to 27,878.96, South Korea’s Kospi fell by 2.18% to 2,426.89, and Australia’s S&P/ASX 200 decreased by 1.95%.
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