Central Banks Raise Borrowing Costs Globally

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Central banks across the world have raised borrowing costs, driving up interest rates. The Bank of England’s decision to raise interest rates by 50 basis points, bringing borrowing costs to 5%, was a surprise move and a significant shift for the country, with high inflation and a tight labor market justifying the increase, according to policymakers. Meanwhile, Turkey’s central bank raised interest rates by 650 basis points to 15%, which was less than expected, following the re-election of President Recep Tayyip Erdogan, who last year pressured the bank to slash rates despite soaring inflation. Norway’s central bank raised its core lending rate by half a percentage point, while Switzerland’s policymakers hiked its benchmark rate by a quarter point. The rate increases indicate concerns over inflation and mark the end of a decade-long period of cheap borrowing costs.

As borrowing costs increase worldwide, concerns arise that potential borrowers will face increased difficulty obtaining loans, and if interest rates continue to rise, this could lead to a decline in stock markets. Furthermore, homeowners now have less equity than they did a year ago, according to CoreLogic data. The average equity per borrower slipped 1.9% in the first quarter compared to the same period last year, the first annual decline since 2012. With interest rates increasing and equity declining, the fear is that a downturn is inevitable.

Short sellers are betting more than $1tn against US stocks, including Tesla, Apple, Microsoft, Nvidia, and Amazon, according to S3 Partners. As the S&P 500 has climbed more than 13% this year, the bearish bets suggest a potential market correction.

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On a brighter note, Goldman Sachs has named 50 stocks poised to increase profitability faster than the rest of the market, with certain names potentially seeing substantial upside over the next year. Additionally, BMO Capital Markets selected their favourite cheap, fast-growing stocks in the under-the-radar industrials sector, which they said has brimmed with opportunity and has outperformed this month. Here are 16 stocks to watch.

In other news, Warren Buffett has donated about $5bn worth of Berkshire Hathaway shares to the Gates Foundation and other charities, giving away more than half his stockpile.

Frequently Asked Questions (FAQs) Related to the Above News

Why have central banks across the world raised borrowing costs?

Central banks have raised borrowing costs due to concerns over inflation and the end of a decade-long period of cheap borrowing costs.

What was the Bank of England's recent decision on interest rates?

The Bank of England raised interest rates by 50 basis points to 5%, which was a surprise move and a significant shift for the country.

What impact could rising interest rates have on borrowers?

Rising interest rates could make it more difficult for potential borrowers to obtain loans, and decreased equity could also contribute to a potential economic downturn.

Why are short sellers betting against US stocks?

Short sellers are betting against US stocks due to concerns about a potential market correction, even as the S&P 500 continues to climb.

Are there any stocks that are expected to perform well in the near future?

Goldman Sachs has named 50 stocks poised to increase profitability faster than the rest of the market, and BMO Capital Markets has selected fast-growing stocks in the industrials sector that are projected to outperform.

What has Warren Buffett recently done with his shares of Berkshire Hathaway?

Warren Buffett has recently donated about $5bn worth of Berkshire Hathaway shares to the Gates Foundation and other charities, giving away more than half his stockpile.

Please note that the FAQs provided on this page are based on the news article published. While we strive to provide accurate and up-to-date information, it is always recommended to consult relevant authorities or professionals before making any decisions or taking action based on the FAQs or the news article.

Advait Gupta
Advait Gupta
Advait is our expert writer and manager for the Artificial Intelligence category. His passion for AI research and its advancements drives him to deliver in-depth articles that explore the frontiers of this rapidly evolving field. Advait's articles delve into the latest breakthroughs, trends, and ethical considerations, keeping readers at the forefront of AI knowledge.

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