LONDON: Stock markets tumbled, the pound crashed against the dollar and oil prices slumped on Friday on growing recession fears after central banks this week ramped up interest rates to fight decades-high inflation.

With price rises showing no solid sign of letting up, monetary policymakers have gone on the offensive, warning that short-term hits to economies are less painful than the long-term effects of not acting.

The Federal Reserve’s decision on Wednesday to lift borrowing costs by 0.75 percentage points for a third successive meeting was followed by a warning that more big rises were in the pipeline and that rates would likely come down only in 2024.

There were similar moves by central banks in other countries including Britain, Sweden, Norway, Switzerland, the Philippines and Indonesia — all pointing to a dark outlook for markets.

Wall Street extended losses Friday while European equities sank in afternoon deals and Asia finished lower.

“A negative end to the week in Asia, and Europe has quickly followed as the prospect of much more tightening and a recession weighs on sentiment,” said Craig Erlam, analyst at trading platform OANDA.

In a sign that recession expectations are rising, the 10-year US Treasury yield jumped to its highest level in a decade.

The UK 10-year yield struck an 11-year high on Friday.

The British pound tumbled to a 37-year low under $1.10 as a tax-cutting budget sparked public finance concerns while recession fears mounted.

Recession fears also caused oil prices to fall, with the main US contract, WTI, falling below $80 for the first time since January.

Published in Dawn, September 24th, 2022

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