Dow sinks another 464 points as slowdown fears worsen


The fed acted after an extraordinary pressure campaign by President Trump, who fears further rate hikes will undermine the USA economy, which could in turn cause him political challenges. While Chair Powell stressed that his views are increasingly dependent on data, he noted that the dispersion of estimates among FOMC members had increased; in other words, the Fed's confidence in its own forecast was decreasing (less dispersion means more unanimity in views).

Trump - who appointed the Fed's chairman, Jerome Powell - has repeatedly blamed the central bank for unsettled markets and dismissed analysts who cite other factors, such as rising trade tariffs.

"Our long-standing view has been that serious negotiations would start after the USA midterms, but it would still take months and additional twists and turns before a deal is struck". Yesterday the Australian share market closed 75 points lower with the S&P/ASX 200 Index closing 1.3 per cent lower at 5506.

With the Dow and S&P 500 on pace for the worst December since 1931 and with many stocks hitting 52-week lows, Mnuchin added that he feels "U.S. equities are tremendous value".

Bond prices rose, sending yields lower.

Officials also altered key language in their statement, saying the FOMC "judges that some further gradual increases" in rates will likely be needed, a shift from previous language saying the FOMC "expects that further gradual increases" would be required. "It is a more moderate rate hike, but it is a rate hike, and there is still a gap between where the Fed is and where the market is in terms of policy expectations for next year".

Inflation is expected to be at 1.9 percent next year, down from 2.0 percent projected in September, before picking up to 2.1 percent in 2020.

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Yet while stock markets may be clamouring for an end to monetary tightening, investors should take comfort in the knowledge that the Fed does not believe the world's largest economy is about to slip into recession.

He said the strength of the economy - which is expected to grow about 3% this year - justified another rate rise, despite recent "cross currents".

The move showed that the Fed sees the economy growing quickly enough to require a tap on the monetary brakes to keep it from overheating. They fear that continued increases in interest rates will slow the economy too dramatically. Higher interest rates and a stronger dollar will make investments in United States more attractive.

The stock market turned sharply negative Wednesday, erasing earlier gains, after the central bank said it would hike interest rates to a target range of 2.25% and 2.5%, a move that was widely expected. As we see it, the Fed's stance has softened as the number of rate hikes planned for 2019 was standing at three and this has been reduced to two.

But the slight revision was not enough to ease market fears over a further US economic slowdown on the back of trade tensions, a waning boost from tax cuts and tightening monetary conditions for companies. It dropped 7 percent Tuesday and closed at a 16-month low, and has fallen nearly 40 percent since October 3.

On Wall Street, The Dow Jones fell 386.68 points, or 1.63 per cent, to 23,288.96, the S&P 500 fell 34.8 points, or 1.37 per cent, to 2511.36 and the Nasdaq Composite shed 161.74 points, or 2.38 per cent, to 6622.18. On a technical basis, the most noteworthy aspect of today's price increase is the fact that for the first time since May of this year current pricing is above its 200-day moving average.