Thursday, June 08, 2006

Bernanke’s effect on investing

(Source Article: The Bernanke Panic - CNN)

US Fed Chairman Ben Bernanke has lately frightened off US investors with rate hikes; now, he’s not just frightening them here in the US—he’s frightening them world wide.

Investors from Jakarta to Tokyo to Wall Street on Thursday accelerated the sell-off because of fears that the Federal Reserve—and other central banks falling in line—would hinder economic growth through their efforts to combat inflation.

Last month stock markets large and small felt adverse effects after the Fed raised rates for the 16th time in a row—hinting that more hikes are forthcoming. (see Fed raises rates again - CNN) Since that time, losses in stock markets at home and abroad have been as high as 14 percent, with those in emerging markets like Bombay losing as much as 26%.

On Thursday, the European Central Bank, as well as those in South Korea and India, hiked rates, and many analysts expect the US Fed Chairman will hike rates again in June. Still, most economists feel that rates aren’t high enough to spark to life a global recession, with demand in places like China and India keeping many products flowing out of other emerging economies. However, many corps and their executives have a different opinion (see Execs worried about economy - CNN)

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