HONG KONG, June 10 — Markets extended a global sell-off today after the European Central Bank laid the groundwork to join others in a programme of interest rate hikes, while attention turns to the release of key US inflation data.
Still, the move helped push down oil prices — a key driver of global inflation — owing to concerns about the impact on demand. It also sharply upgraded its inflation forecasts for this year and next while lowering the economic growth outlook. “The tone will remain hawkish and the tough talk on inflation will continue.” However, he added that “the significant upward revisions to core inflation projections are close to ending. Risk markets could take solace if one or two participants shift to seeing the inflation outlook is more balanced”.
“Besides, one single month of data doesn’t define a trend.” And OANDA’s Edward Moya said the darkening outlook could provide an argument for the Fed to apply the brakes to hiking later in the year.
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