While the 75-basis point rise in US rates was largely expected, particularly after US inflation proved stickier than hoped in August, the messaging around the decision helped put markets in a tizz overnight.
Wall Street ended a see-saw session firmly in the red as Federal Reserve chair Jerome Powell, like a sawbones of yesteryear warning a patient the leg will have to come off to prevent the spread of gangrene, noted there was no painless way to bring inflation under control.
AJ Bell investment director, Russ Mould, said: “This reinforced investors’ growing realisation that central banks no longer have their backs to the extent they have done over the last decade or more.
“The Bank of England is widely expected to follow in its US counterpart’s footsteps later today – with a key question being whether the pain of higher rates will really deliver lower inflation given the myriad global causes of surging prices. Among them, big falls in the value of sterling which increase the relative cost of importing goods.
“The continuing and escalating conflict in Ukraine, with Russia ramping up tensions, has been a big contributor to inflationary pressures and Russian and Kazakh gold miner Polymetal has been caught up in the events.
“While it maintained production guidance alongside its first-half results, these details were somewhat overshadowed as it swung to a loss and unveiled a share exchange plan for those affected by sanctions.”Fed puts markets in a tizz with latest hike