US stock indices continued lower on Monday, adding to last week’s sharp sell-off as investors fret over the Federal Reserve's plan to keep raising interest rates in their fight against inflation, even at the cost of an economic slowdown.
Powell did not hesitate to say that Fed would follow the path of a more restrictive monetary policy even if the economy could suffer a deep slowdown. He stated that the objective is for the unemployment rate to worsen soon to avoid a spiral of rising wages that would turn inflation into a structural problem for the economy. The Federal Reserve set the goal of monetary policy to achieve full employment after the pandemic crisis. Now that they have succeeded, it seems this is a problem, at least deduced from Powell's statements.
The markets reacted dramatically lower, and the US Dollar strengthened against all its peers. This creates an additional problem beginning to impact emerging countries that do not export raw materials financed in US Dollars and see how their currencies collapse. This scenario applies to India, which has been forced to intervene in the market to stop the fall of its currency.