Doha, September 20 (QNA) - The financial markets, stock, bonds, metals and global exchange markets held their breath, awaiting the decisions that the US Federal Reserve will take tomorrow, regarding raising interest rates on the dollar, as these decisions will have huge repercussions on the financial markets, and the prices of oil, gold and other major energy and mineral sources, which form the backbone of international trade.

Economists expectations indicate a possible raise of the interest rate by seventy-five basis points to reach three and a quarter percent. They even say that raising the rate by one hundred points is not completely excluded. In fact, if approved, it would be the largest increase by the US Federal Reserve since 1984.

The Feds officials will issue their decision tomorrow at seven pm GMT, and at half past seven, the Chairperson of the US Federal Reserve Jerome Powell will answer reporters and journalists questions about his own expectations: which may lead to a rise in stock and bond prices or may lead prices to decline.

Furthermore, markets will also monitor the statement issued by the US Reserve, which will include the future expectations of the Fed and the rates that the interest rate may reach during next year.

When the US inflation figures for August were released last Tuesday, and they were higher than the general markets estimates of eight percent, stock markets around the world fell sharply, and Wall Street suffered a violent jolt: with the Dow Jones Industrial Average falling to 1276 points or 3.9 percent, the S&P 500 index fell 4.3 percent, while the Nasdaq Composite index fell 5.2 percent. Given that all three indices were higher before the inflation data was announced, and even recorded gains for four consecutive sessions before Tuesday.

As the US Federal Reserve continues to tighten monetary policy, central banks from Europe to the Asia Pacific, Africa and South America will continue to raise interest rates to curb their own inflation, while at the same time preventing the attraction of other countries' capital into the United States: leading to a wide range of negative effects on emerging market economies, such as currency depreciation, falling stock markets, and even government debt defaults.

Some Washington observers regard Fed Chairperson Jerome Powell as a hawk: focused heavily on lowering inflation by raising interest rates, even if doing so leads to a sharper deflation. However, others said that Powell would not appear at tomorrow's press conference as a pessimist. Rather, he will very much appear like someone who is committed to ensuring price stability and doing whatever it takes to make it happen.

In late August, Powell said during an economic seminar that the US economy will need a tight monetary policy for some time before inflation is under control: a fact that means slower growth, a weaker labor market and some pain to families and companies, alerting that there is no quick fix for high prices.

Inflation in the United States got out of control during the sixties and seventies of the last century because the Federal Reserve did not raise interest rates quickly or by high enough rates: as a result, the central bankers and the American economy had to pay the price in the early eighties, by raising interest rates to 20 percent, which unleashed the worst recession since the Great Depression. Powell says the Fed wants to avoid such an outcome by acting aggressively now.

Increased interest rates by the Federal Reserve pushed the dollar higher against other major currencies: making imported goods less expensive for Americans, while making it difficult for individuals and companies in other countries to afford goods made outside their borders. In addition, major oil importers get a strong blow, since crude is priced in dollars: consequently, the strength of the dollar hurts developing countries with large dollar debts, because their local currencies lose value against the dollar, which requires more of those currencies to make debt payments.

Washington economic analysts believe that the Fed should keep interest rates higher for some time to ensure that inflation is on its way strongly to two percent, and added that it will take much longer than previously thought for the reserve to temporarily stop raising interest rates and that the world economy faces a bumpy road ahead in the coming future.

According to analysts, the decline in the stock and bond markets this year has been painful. They added that it is still difficult to predict what the future holds: however, some prominent investors and business leaders have warned that the worst for markets may be yet to come.

In a new report, the World Bank warned of the rising risks of a global recession, as the United States and other governments are cutting spending on pandemic relief measures. The report added that the global economy is getting the least support from policymakers than at any other time in the last 50 years.

Moreover, the International Monetary Fund also warned this summer that the global economy is at risk of slipping into recession due to the aftermath of the war in Ukraine, the epidemic and inflation. (QNA)