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US stock markets experienced their worst half year since 1970, amid growing concern that anti-inflationary steps might affect economic growth.
The S&P 500 index fell by 20.6%, and other US indices also fell sharply.
Financial markets in Europe, the UK and Asia also suffered badly.
This comes as central banks around the world are trying to control the sharp rise in the cost of living, as the prices of basic commodities, such as food and fuel, have risen dramatically.
Economists expect the United States, the world’s largest market, to witness a recession this year, as interest rates continue to rise.
“If the US Federal Reserve continues to raise interest rates, this will trigger negative reactions in the financial market,” Dan Wang, chief economist at China’s Hang Seng Bank, told the BBC.
The United States recorded the highest inflation rate in 40 years, what is the reason?
Sean Olive, from EMB Capital, said: “Stocks will continue to be fragile in the short term as central banks continue to tighten belts to combat high levels of inflation, with the war in Ukraine continuing and recession fears high.”
Another important US index, the Dow Jones Industrial Average, fell 15 percent in the first half of the year, the largest drop in the same period since 1962.
Meanwhile, the Nasdaq, which focuses on technology goods, lost regarding 30 percent of its value, its biggest percentage drop in the first half of the year.
The indices of major financial markets outside the United States witnessed a similar decline.
The UK’s FTSE 250 index fell by more than 20 percent, while the European Stoxx 600 index fell by nearly 17 percent, while the market indices in the Asia-Pacific region fell by regarding 18 percent.
This comes at a time when the world’s major central banks are taking steps to slow the pace of the sharp rise in the cost of life and rising interest rates.
Earlier this week, three major central bank chiefs warned that the era of moderate inflation and moderate bank interest rates is over.
The heads of the US Federal Reserve, the European Central Bank and the Bank of England said quick steps were needed to prevent price hikes from spiraling out of control.
They also warned that steps to control the inflation shock caused by the war in Ukraine and the coronavirus pandemic might have a significant negative impact on global economic growth.
“There is a risk that we will go too far, but I don’t see that as the most serious risk to the economy,” said Jerome Powell, Federal Reserve director. “The biggest mistake would be failure to control price stability.”
Last month, the Federal Reserve announced the largest rate hike in 30 years, in an attempt to curb the sharp rise in consumer prices.
The Bank of England, in turn, raised the interest rate to the highest level in 13 years, from 1 to 1.25 percent.
