Canadian and US stock markets fall after US Federal Reserve decision.

Canada’s main stock index ended down nearly one percent and US stock indices closed even lower after the US Federal Reserve raised its key interest rate by three-quarters. percentage point and noted that more sharp increases would follow.

The rate hike was the third in a row of the same magnitude, taking its benchmark short-term rate to a range of between 3 percent and 3.25 percent, the highest level since early 2008.

Officials also forecast that they would further raise their benchmark rate to about 4.4 percent by the end of the year, one point higher than they had forecast in June.

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S&P/TSX Composite Ends Nearly 200 Points Drop, US Stock Markets Fall Too

Wednesday’s rate hike was in line with expectations, allowing markets to rally shortly after the announcement before falling sharply, as Federal Reserve Chairman Jerome Powell warned at a press conference on the rocky road ahead. To go.

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“If we want to light the way into another period of a very strong job market, we have to put inflation behind us,” Powell said. “I wish there was a painless way to do it. There isn’t.

At the close, the S&P/TSX Composite Index was down 184.15 points, or 0.95 percent, at 19,184.54.

In New York, the Dow Jones industrial average fell 522.45 points, or 1.7 percent, to 30,183.78. The S&P 500 Index fell 66 points, or 1.7 percent, to 3,789.93, while the Nasdaq Composite fell 204.86 points, or 1.8 percent, to 11,220.19.

The reaction could have been worse if the Fed had hiked rates even higher, as some expected, said Ryan Crowther, portfolio manager at Franklin Templeton Canada.

“If it had gotten to 100, or especially higher, there would have been a more likely backlash because it would just have implied that they think there’s, you know, even more urgency to get the policy done.”

The rate decision comes as economies globally, including China, Europe and the US, are showing signs of weakening, which likely contributed to the somewhat lower rate hike, Crowther said, even though inflation surprised to the upside by 8.3% last week.

The potential for higher rates in the US and falling commodity prices have put pressure on the Canadian dollar, which traded at 74.64 US cents compared to 74.93 US cents. US dollar on Tuesday.

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The Fed’s announcement also came on the same day that Russian President Vladimir Putin issued a partial mobilization of reservists and warned that he is not lying about using everything at his disposal to protect Russia.

Markets don’t seem to have reacted much to the apparent escalation of the war in Ukraine, Crowther said, but that means there will be continued disruption ahead.

“The impact of the war continues in terms of how it affected certain commodities and led to much more volatility in various commodities, including natural gas and fertilizers.”

The October natural gas contract was up six cents at $7.78 per mmBTU, while the November crude contract was down $1.00 at $82.94 a barrel.

The December gold contract was up $4.60 at $1,675.70 an ounce and the December copper contract was down four cents at $3.47 a pound.

© 2022 The Canadian Press

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