Rate hike in sight: shaken markets

The Paris Stock Exchange ended the last session of the week down 1.99%, while Frankfurt dropped 2.48% and London 1.39%.

At mid-session, on Wall Street, the Dow Jones index lost more than 1.7%.

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Investors were reacting to several statements from the most prominent central bankers confirming their monetary tightening in the coming weeks.

Christine Lagarde, President of the European Central Bank (ECB), visiting Washington, spoke on CNBC on Friday of a

of a rate hike by the end of the year if inflation remains high.

The eurozone consumer price index reached 7.5% in March, well above the ECB's official medium-term target of 2%.

The slightest word from central bankers is scrutinized.

The markets believe that Christine Lagarde has taken a step closer to raising rates.

Investors worried

The day before, the American counterpart of Christine Lagarde, Jerome Powell, the head of the Fed, had declared that a rise in the key rate of 0.5%

This is the gesture that most investors were waiting for but never “Jay” Powell had mentioned it so clearly.

Ahead of the ECB, the Fed has already started to raise its rates in March by 0.25%.

In the United States, inflation rose to 8.5% in March.

At its highest for forty years, rising prices have become the main concern of American households, and a major political concern for Joe Biden.

Raising rates is the traditional weapon of central banks to limit inflation, via higher credit prices and a tightening of the liquidity tap.

The prospect of rising interest rates generally shifts capital towards the bond market, to the detriment of equity markets.

Investors are also worried that a too late rise in rates will stifle growth weakened by the context of the war in Ukraine.