* U.S. stocks up in afternoon trading
* Bank of England surprises investors with half-point rate
hike
* Oil prices down sharply
(Updates to afternoon U.S. markets activity; adds Bowman
comments paragraph 7, details on grains, oil price falls in last
2 paragraphs)
NEW YORK, June 22 (Reuters) – The U.S. dollar and
Treasury yields climbed on Thursday as Federal Reserve Chair
Jerome Powell suggested more U.S. interest rate hikes may be
needed to curb inflation and the Bank of England delivered a
bigger-than-expected rate hike.
A global stock index was little changed.
The Swiss National Bank (SNB) and Norges Bank also hiked
their benchmark rates, underscoring central bank worries about
global inflation while fueling concern about the impact of rate
hikes on demand.
The BofE announced a half-point rate hike to 5%. Though the
size of the hike surprised markets, expectations for BoE rate
tightening surged in recent days.
Before Thursday’s decision, investors expected the BoE’s
Bank Rate to peak at 6% by the end of the year. By contrast,
economists polled by Reuters last week saw a 5% peak.
Powell, in his second day of testimony to lawmakers,
suggested again the U.S. central bank has not reached the end of
its tightening cycle.
In addition,
Fed Governor Michelle Bowman
, at an event in Cleveland, said “additional policy rate
increases” will be needed to control inflation.
“Investors need to recognize the reality that central banks
around the world are going to continue to fight inflation
aggressively,” said Oliver Pursche, senior vice president and
adviser for Wealthspire Advisors in Westport, Connecticut.
Last week, the Fed held its benchmark interest rate steady
at between 5% and 5.25%, but most policymakers see at least two
more quarter-point rate increases by the end of this year.
On Wednesday, Powell said in remarks to lawmakers in
Washington that the outlook for two more 25-basis-point rate
increases are “a pretty good guess” of where the central bank is
heading if the economy continues in its current direction.
The dollar index, which measures the currency against
six rivals, rose 0.4% to 102.40. Against the yen, the dollar was
up 0.8% at 142.96 yen.
U.S. Treasury yields also rose, in line with those on UK
bonds, as investors focused on the hawkish comments from Powell
and the BoE’s hike.
Benchmark 10-year notes were up 7.2 basis points
to 3.795%, from 3.723% late on Wednesday.
On Wall Street, stocks were mostly higher, with consumer
discretionary and technology shares among
the day’s biggest gainers.
The Dow Jones Industrial Average rose 10.58 points,
or 0.03%, to 33,962.1, the S&P 500 gained 11.56 points,
or 0.26%, to 4,377.25, and the Nasdaq Composite added
94.96 points, or 0.7%, to 13,597.16.
The pan-European STOXX 600 index lost 0.51% and
MSCI’s gauge of stocks across the globe shed
0.02%.
In commodities, Chicago Board of Trade corn and soybean
futures posted sharp declines after profit-taking, while oil
futures fell amid worries over fuel demand.
U.S. crude fell 4.16% to settle at $69.51 a barrel,
while Brent settled at $74.14, down 3.86% on the day.
(Reporting by Caroline Valetkevitch; additional reporting by
Amanda Cooper and Marc Jones in London, and Ankur Banerjee in
Singapore; Editing by Emelia Sithole-Matarise, Hugh Lawson,
David Evans and Leslie Adler)
