New York: An index of global stock markets fell, while short-term US Treasury yields rose on Friday, after Federal Reserve Chair Jerome Powell said the US economy will need tight monetary policy “for some time” before inflation is under control.
The dollar erased early losses to turn positive against a basket of currencies, while gold, which loses appeal as interest rates rise, fell after Mr Powell’s comments.
Tight monetary policy “for some time” means slower growth, a weaker job market and “some pain” for households and businesses, Mr Powell said in a speech to the central banking conference in Jackson Hole, Wyoming.
Stock markets in the US ended the week sharply down following tough comments by the head of the country’s central bank, the Federal Reserve.
The bank’s chairman, Jerome Powell, said the bank must continue to raise interest rates to stop inflation from becoming a permanent aspect of the US economy.
His words sent US stocks into a tailspin, with markets tumbling 3%.
It comes as Americans are having to pay more for basic goods.
Inflation in the world’s largest economy is at a four-decade high.
During a highly anticipated speech at a conference in Wyoming on Friday, Mr Powell said the Federal Reserve would probably impose further interest rate hikes in the coming months and could keep them high “for some time”.
“Reducing inflation is likely to require a sustained period of below-trend growth,” he said at the meeting in Jackson Hole.
Investors are concerned that if economic growth falters, higher interest rates will increase the likelihood of a recession.
