Japan, the outlier among major developed economies, kept interest rates steady on Thursday only to be punished as traders pushed the yen to a record low against the dollar. It was a potential sign of a massive adjustment to come as the world adapts to U.S. interest rates rising to levels not seen since the global financial crisis.
The actions by the Fed, along with those of other major central banks, have formed the backdrop for warnings from international officials and analysts. The Fed’s response has stood out both because of the dollar’s global role and the aggressiveness of the U.S. central bank. Along with the Fed’s action on Wednesday, a half dozen other countries followed suit with their own rate increases.
World stocks fell close to a two-year low and emerging market currencies plummeted as investors prepare for a world where growth is scarce and credit harder to get. The Bank of England raised rates and said it would continue to “respond forcefully, as necessary” to inflation. The European Central Bank is all but certain to hike again on Oct. 23.