Market declines have accelerated in recent days as pessimism about the global economic outlook has spread, with many investors warning central bank action could stamp out the recovery. Photograph: Justin Lane/EPAWall Street stocks sold off sharply on Thursday as Switzerland and the UK joined a global rush to raise interest rates, following a sharp boost to borrowing costs by the US Federal Reserve as central banks attempt to tame high inflation.
The S&P had closed the previous session 1.5 per cent higher after the Fed raised its main interest rate by 0.75 percentage points, with chair Jay Powell saying he expected rises of this magnitude to be relatively uncommon. Sterling added 0.8 per cent against the dollar, bouncing back from earlier declines. It also gained against the euro, trading at 85.3 pence.
UK government debt prices were down after the decision, with the 10-year gilt yield up 0.05 percentage points on the day at 2.52 per cent, as the BOE warned UK inflation might rise above 11 per cent before the end of the year. Bond yields rise when prices fall.