U.S. Treasury Secretary Janet Yellen mentioned on Tuesday (local time) that interest rates may have to be raised, which impacted stock markets at key economies around the world.
"It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat," Yellen said during an economic forum presented by The Atlantic. "Even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates.” Such remarks are interpreted as intention to raise rates to address an overheated economy and inflation concerns.
The stock market immediately responded to such remarks. Tech-led Nasdaq dropped by 1.88% as well as stock markets in Germany, France and other European countries. As the impact grew, Yellen tempered her comments, by saying her remarks did not indicate that the Fed will be raising rates or have recommended to do so. Nonetheless, major economies are predicting that they may be restoring interest rates, which were lowered amid the pandemic, earlier than expected. This is in reflection to relatively faster global economic recovery and concerns on an overheated asset market and surge in raw material prices.
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