AFP

Wall Street stocks fell and the dollar gained Wednesday after the Federal Reserve announced another large interest rate hike and indicated it was in no rush to moderate its stance.

The US central bank raised the benchmark lending rate by 0.75 percentage point, the fourth straight increase of that size and the sixth hike this year.

The move was expected, but markets were fixated on signals on whether the Fed might undertake smaller hikes in December and at future meetings. Equities had rallied in October in part due to hopes for a Fed pivot.

But after rising on the Fed’s policy statement, equities tumbled into the red during the press conference when Fed Chair Jerome Powell said it was “very premature” to discuss pausing rate increases and brushing back criticism that the central bank had “overtightened.”

FHN Financial’s Chris Low noted that Powell indicated that in order to tame inflation, interest rates would need to settle at a higher level than previously thought.  

“The biggest takeaway was not the expected strong hint at a slower pace,” Low said. “It was the realization rates would have to go higher.”

Stocks gave up their gains and turned negative before finishing the day firmly lower.

The S&P 500 dropped 2.5 percent, while the dollar also reversed course, finishing higher against the euro and pound.

The Fed’s aggressive rate hikes this year so far have not had a noticeable impact on prices, but they have stoked fears of an impending recession even as the job market remains strong.

While the US housing market has cooled sharply amid higher interest rates, key inflation measures show prices continue to rise and the labor market remains tight, with job openings rising and private hiring accelerating in October.

Elsewhere, London equities shed 0.6 percent on the eve of another expected large rate increase from the Bank of England.

In the eurozone, Frankfurt and Paris fell following weak eurozone manufacturing survey data and a dip in German exports.

In Asia, stocks were mixed. Hong Kong led gainers — extending the previous day’s surge — as traders remain hopeful China could begin rolling back its economically painful zero-Covid policy, the day after an unverified statement suggesting a shift was taking place.

Among individual companies, Boeing gained 2.8 percent as executives outlined a plan to return to financial strength in the 2025-26 timeframe after a lengthy slump due to the 737 MAX and Covid-19 crises.

– Key figures around 2100 GMT –

New York – Dow: DOWN 1.6 percent at 32,147.76 (close)

New York – S&P 500: DOWN 2.5 percent at 3,759.69 (close)

New York – Nasdaq: DOWN 3.4 percent at 10,524.80 (close)

London – FTSE 100: DOWN 0.6 percent at 7,144.14 (close)

Frankfurt – DAX: DOWN 0.6 percent at 13,256.74 (close)

Paris – CAC 40: DOWN 0.8 percent at 6,276.74 (close)

EURO STOXX 50: DOWN 0.8 percent at 3,622.01 (close)

Tokyo – Nikkei 225: DOWN 0.1 percent at 27,663.39 (close)

Hong Kong – Hang Seng Index: UP 2.4 percent at 15,827.17 (close)

Shanghai – Composite: UP 1.2 percent at 3,003.37 (close)

Euro/dollar: DOWN at $0.9816 from $0.9883 on Tuesday

Pound/dollar: DOWN at $1.1390 from $1.1486

Dollar/yen: DOWN at 147.90 yen from 148.23 yen

Euro/pound: UP at 86.17 pence from 85.96 pence

Brent North Sea crude: UP 1.6 percent at $96.15 per barrel

West Texas Intermediate: UP 1.8 percent at $90.00 per barrel

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The Federal Reserve delivered another steep interest rate increase on Wednesday, as expected, with its move to cool red-hot inflation taking on more weight amid the political maelstrom of key US midterm elections.

With high inflation squeezing American families of all political stripes, President Joe Biden faces a battle to avoid losing control of both chambers of Congress.

The Fed’s aggressive rate hikes this year so far have not had a noticeable impact on prices, but they have stoked fears of an impending recession even as the job market remains strong.

The US central bank raised the benchmark lending rate by 0.75 percentage point — the fourth straight increase of that size and the sixth hike this year — in its all-out battle to tame inflation not seen since the 1980s.

The latest three-quarter percentage point increase takes the benchmark lending rate to 3.75-4.0 percent, the highest since January 2008.

By making it more costly to borrow, policymakers aim to put the brakes on spending and bring demand more into balance with supply that has been battered by global supply issues and the ongoing Russian war in Ukraine.

While the US housing market has cooled sharply amid higher interest rates, key inflation measures show prices continue to rise and the labor market remains tight, with job openings rising and private hiring accelerating in October.

The policy-setting Federal Open Market Committee (FOMC) said more rate increases will be needed to tamp down rising prices but it will take into consideration the impact on the economy when deciding on the pace of future moves — opening the door to the possibility it will implement smaller steps in coming months.

But Fed Chair Jerome Powell cautioned that policymakers are not yet ready to halt their efforts.

“It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation,” Powell told reporters.

“It’s very premature in my view to be thinking about or talking about pausing our rate hike. We have a ways to go.”

But he said the committee could begin discussing the possibility of slowing the aggressive pace of rate increases at the December meeting, but ultimately might have to increase the level higher than expected to achieve the goal of bringing inflation down to two percent.

– Slower growth –

As central bankers walk a tightrope fighting inflation while avoiding tipping the economy into a recession, politicians are ramping up pressure on Fed officials.

Powell acknowledged that bringing inflation down is “likely to require below-trend growth,” and that the window to achieve a soft landing — slowing inflation while avoiding a downturn — has narrowed.

Biden is facing growing voter frustration over high inflation and there are signals in polling that a “red wave” could sweep the opposition Republicans to power in the House and Senate.

Republicans put the blame for inflation and slower growth squarely on Biden, while the president’s Democrats worry the Fed moves will lead to higher unemployment.

But Powell has argued that allowing high inflation to become entrenched would inflict even more pain on American families and workers.

In his press conference Wednesday, Powell dismissed criticism that the central bank had moved too quickly, and said the outlook for the world’s largest economy is highly uncertain.

“No one knows whether there’s going to be a recession or not, and if so, how bad that recession would be,” he said.

White House spokesperson Karine Jean-Pierre said the Fed moves are “part of our transition” to “stable and steady growth with lower inflation.”

The US stock market endured another volatile day, jumping after the Fed announcement, when it looked like a pause was coming, and then sinking as Powell spoke.

Ian Shepherdson of Pantheon Macroeconomics said that while the statement offered hope of a policy pivot, “Powell isn’t budging yet.”

He said the FOMC offered “a clear signal that the wave of 75bp hikes is over,” however, the Fed chief “was deeply reluctant to promise that shift in December.”

Germany on Wednesday signed off on an energy price cap, the cornerstone of a massive 200-billion-euro ($198-billion) package to shield households and businesses from rising costs.

“The source for these consequences and great challenges is (Russian President Vladimir) Putin’s war,” German Chancellor Olaf Scholz said at a press conference. 

The support package was Germany’s response “so that citizens do not have to fear their bills”, said Scholz, who has ploughed ahead with plans despite criticism from European partners.

Germany’s businesses have also been crying out for help at a time when Europe’s largest economy is drifting towards recession and inflation has shot past 10 percent.

The plan will see the price for a percentage of household and businesses’ typical consumption capped at lower-than-market prices.

For gas, 25,000 larger businesses, as well as almost 2,000 hospitals and schools will benefit from the cap as soon as January 1 next year, according to the plan agreed between the federal government and regional leaders. 

Households and smaller businesses meanwhile could have to wait until March 1 at the latest for the price brake to come into force.

Policymakers will “seek” to apply the relief retroactively from February 2023, according to the document.

A similar price cap will also apply to electricity from the start of the new year in January, with the measures set to last through to the end of April 2024.

– December help –

While the cap for smaller consumers will only come into force later, the government will pick up their heating bills in December.

For households, the price of a kilowatt-hour of gas will be capped at 12 cents for up to 80 percent of their typical usage.

The same unit of gas currently costs billpayers 18.6 cents, according to the price comparison site Check 24.

All in all, the support measures could save a single-person household with a typical gas consumption of 5,000 kWh around 264 euros over a year, the site estimates.

The partial price cap was designed to maintain “incentives to save energy” over the winter while supplies are short, according to the government paper, despite concerns that lowering prices would sustain demand.

The plans left a “winter gap” for consumers until at least February, North Rhine-Westphalia state premier Hendrik Wuest said at the same news conference as Scholz.

Wuest, who had pushed for the government to bring the price cap in earlier for households, said the chancellor had agreed to “examine” alternative solutions put forward by regional leaders.

– European discontent –

Germany, long reliant on Moscow for energy imports, has been hit hard by the sharp rise in prices since the invasion of Ukraine and the cut to supplies.

Despite the Germany economy eking out 0.3-percent growth between July and September, most analysts still expect the country to slip into recession as the high cost of energy drags on production.

Businesses that have been pushing for more support from the government welcomed the plans.

The price cap measures should “create a bit of security and at the same time ease worries”, the BDI industrial lobby said Monday ahead of the final agreement.

Berlin’s massive go-it-alone plan to shield its economy has ruffled feathers among European partners who would have preferred a common solution.

They feared that more highly indebted EU countries could not afford the outlay made by Germany, while the plan could affect their own energy costs.

Germany’s energy price shield will be partly financed through new borrowing through an economic stabilisation fund created during the coronavirus pandemic. 

Berlin also intends to fund the cap by skimming off part of the bumper profits made by energy companies as prices have risen.

Germany on Wednesday signed off on an energy price cap, the cornerstone of a massive 200-billion-euro ($198-billion) package to shield households and businesses from rising costs.

“The source for these consequences and great challenges is (Russian President Vladimir) Putin’s war,” Scholz said at a press conference. 

The support package was Germany’s response “so that citizens do not have to fear their bills”, said Scholz, who has ploughed ahead with plans despite criticism from European partners.

Germany’s businesses have also crying out for help at a time when Europe’s largest economy is drifting towards recession and inflation has shot past 10 percent.

The plan will see the price for a percentage of household and businesses’ typical consumption capped at lower-than-market prices.

For gas, 25,000 larger businesses, as well as almost 2,000 hospitals and schools will benefit from the cap as soon as January 1 next year, according to the plan agreed between the federal government and regional leaders. 

Households and smaller businesses meanwhile could have to wait until March 1 at the latest for the price brake to come into force.

Policymakers will “seek” to apply the relief retroactively from February 2023, according to the document.

A similar price cap will also apply to electricity from the start of the new year in January, with the measures set to last through to the end of April 2024.

– December help –

While the cap for smaller consumers will only come into force later, the government will pick up their heating bills in December.

For households, the price of a kilowatt-hour of gas will be capped at 12 cents for up to 80 percent of their typical usage.

The same unit of gas currently costs billpayers 18.6 cents, according to the price comparison site Check 24.

All in all, the support measures could save a single-person household with a typical gas consumption of 5,000 kWh around 264 euros over a year, the site estimates.

The partial price cap was designed to maintain “incentives to save energy” over the winter while supplies are short, according to the government paper, despite concerns that lowering prices would sustain demand.

The plans left a “winter gap” for consumers until at least February, North Rhine-Westphalia state premier Hendrik Wuest said at the same news conference as Scholz.

Wuest, who had pushed for the government to bring the price cap in earlier for households, said the chancellor had agreed to “examine” alternative solutions put forward by regional leaders.

– European discontent –

Germany, long reliant on Moscow for energy imports, has been hit hard by the sharp rise in prices since the invasion of Ukraine and the cut to supplies.

Despite the Germany economy eking out 0.3-percent growth between July and September, most analysts still expect the country to slip into recession as the high cost of energy drags on production.

Businesses that have been pushing for more support from the government welcomed the plans.

The price cap measures should “create a bit of security and at the same time ease worries”, the BDI industrial lobby said Monday ahead of the final agreement.

Berlin’s massive go-it-alone plan to shield its economy has ruffled feathers among European partners who would have preferred a common solution.

They feared that more highly indebted EU countries could not afford the outlay made by Germany, while the plan could affect their own energy costs.

Germany’s energy price shield will be partly financed through new borrowing through an economic stabilisation fund created during the coronavirus pandemic. 

Berlin also intends to fund the cap by skimming off part of the bumper profits made by energy companies as prices have risen.

The Federal Reserve delivered another steep interest rate increase on Wednesday, as expected, with its move to cool red-hot inflation taking on more weight amid the political maelstrom ahead of key US midterm elections.

With high inflation squeezing American families of all political stripes, President Joe Biden faces a battle to avoid losing control of both chambers of Congress.

The Fed’s aggressive rate hikes this year so far have not had a noticeable impact on prices, but increase the risk the US economy could suffer a recession even as the job market remains strong.

The US central bank raised the benchmark borrowing rate by 0.75 percentage point — the fourth straight increase of that size and the sixth hike this year — in its all-out battle to tame inflation not seen since the 1980s.

The policy-setting Federal Open Market Committee (FOMC) signaled that more increases will be needed to tamp down rising prices but it will consider the impact on the economy when deciding on the pace of future moves — opening the door to the possibility it will implement smaller steps in coming months.

The latest three-quarter percentage point increase takes the benchmark lending rate to 3.75-4.0 percent, the highest since January 2008.

In a statement at the conclusion of its two-day policy meeting, the US central bank said more rate hikes “will be appropriate” to achieve a “sufficiently restrictive” level to tamp down inflation.

However, it added that, “in determining the pace of future increases” the Fed will “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

Analysts will scrutinize Fed Chair Jerome Powell’s press conference, due to start at 1830 GMT, for more clarity on whether the FOMC is considering easing off on its aggressive moves or even pausing the rate hikes to assess the impact on prices and the overall economy.

But he faces a difficult chore to balance concerns the Fed is moving too fast, while reaffirming its legal mandate to bring down inflation.

“It will be a challenge for the Fed to signal an eventual shift in policy while also communicating a steadfast commitment to bringing down inflation,” Nancy Vanden Houten of Oxford Economics said in an analysis ahead of the meeting.

She noted that a number of Fed officials in recent weeks have suggested it is time for the central bank to consider slowing the pace of increases to guard against raising rates too far.

While the housing market has cooled sharply amid higher borrowing costs, key inflation measures show prices continue to rise and the labor market remains tight, with job openings rising and private hiring accelerating in October.

– Political pressure –

As central bankers walk a tightrope fighting inflation while avoiding tipping the economy into a recession, politicians are ramping up pressure on Fed officials amid growing worries of an economic downturn.

Biden faces growing voter frustration over high inflation and signs a “red wave” that could sweep the opposition Republicans to power in the House and Senate.

Republicans put the blame for inflation and slower growth squarely on Biden, while the president’s Democrats worry the Fed moves will lead to higher unemployment.

Democratic Senator Sherrod Brown urged the Fed last month to show commitment to its dual mandate — of promoting maximum employment and stable prices — and moderate the rate hikes.

“For working Americans who already feel the crush of inflation, job losses will make it much worse,” Brown said in a letter to Powell.

But Powell has argued that allowing high inflation to become entrenched would inflict even more pain on American families and workers.

Oanda analyst Craig Erlam said it may be too late to avoid a recession “but the Fed has been very clear from the start that while a soft landing is the desirable and attainable outcome, getting inflation under control is the primary focus.”

Social media platform Twitter could become much more entwined with cryptocurrencies and blockchain in the future, one of the backers of Elon Musk’s $44 billion takeover hinted on Wednesday.

Changpeng Zhao, who owns crypto firm Binance and put $500 million into the takeover by the world’s richest man, gave his first hint that he would not be a completely silent investor.

“Let’s give Elon some time to get adjusted,” he told a press conference at the Web Summit tech conference in Lisbon, before adding that he was there to help Twitter in any future crypto-related moves.

Zhao was speaking on the first full day of the get together, which kicked off on Tuesday night with a plea from Ukraine’s first lady for IT workers to use their skills to save lives rather than end them.

“Some IT specialists in Russia have made their choice to be aggressors and murderers,” said Olena Zelenska, urging attendees to make the opposite choice.

The Web Summit brings together start-ups, investors, business leaders and agenda-broadening speakers –- linguist Noam Chomsky and heavyweight boxing champion Oleksandr Usyk are among this year’s line-up.

Organisers said all 70,000 tickets had been sold for the first full-scale edition since coronavirus restrictions halted in-person gatherings in 2020.

Although most major tech firms are represented, the most senior Silicon Valley figures rarely appear at such events any more.

Some attendees were happy with the lower-key approach at a conference that has previously seen the likes of Musk give talks.

“These conferences were getting too big, it was getting harder to find interesting things,” said attendee Gabriele Lemmle from Munich, adding that she was happier to focus on start-ups with fresh ideas.

– Crypto Twitter –

With Silicon Valley bosses in short supply, crypto chiefs filled the void.

In one of his talks, Zhao played down the current slump in his sector and argued that cryptocurrencies were among the most stable assets at the moment.

During his speech at the opening ceremony on Tuesday he had insisted that Musk was the boss and he had no plans for Twitter, but by Wednesday his tone had shifted.

“We want to be very supportive on anything that Twitter does with crypto and web3,” he said, referring to a notional future version of the web that would have crypto and blockchain at its heart.

The Web Summit comes at a time when the tech industry as a whole faces huge difficulties.

Firms are being roiled by supply chain problems, trade disputes between the US and China, plunging profits and creaky business models, and a wider economic slump that has sent investors and consumers fleeing.

But Mark MacGann, a former lobbyist for Uber who leaked thousands of compromising documents on his old firm in July, focused on the problems regulators face in trying to control big tech.

He said regulators were largely limited to issuing fines that were “pocket change” and did nothing to change the behaviour of big tech.

“When you become so big and so wealthy that you become ungovernable and impossible to regulate, that’s very dangerous for society and democracy,” he said. 

MacGann — who led Uber’s lobbying efforts in Europe between 2014 and 2016 — leaked thousands of documents earlier this year that led to widespread accusations that the ride-hailing app had broken the law — allegations the firm denied.

MacGann said Uber had improved since he left, but questioned why the firm was funnelling millions into lobbying designed to stop legislative efforts to give drivers more rights.

And he called for more protection for whistleblowers in tech, arguing that workers who revealed malpractice in the public sector enjoy more safeguards.

Web Summit organisers say more than 1,000 speakers will take part in the event, which runs until Friday, giving talks on subjects from cybersecurity to artificial intelligence.