Stocks fell across the world on Thursday after the Federal Reserve warned that it expected there to be a “long road” to economic recovery in the US, fueling fears about a protracted return to growth in the global economy.
The central bank on Wednesday left interest rates steady at near-zero levels, projecting elevated US unemployment for years and a 6.5% fall-off in US economic output in 2020.
In the US, stocks opened sharply lower after the Labor Department said that an additional 1.5 million Americans filed for unemployment benefits last week.
“Last night’s Fed meeting turned out to be every bit as dovish as was expected, with the US central bank painting a fairly subdued outlook for the US economy,” said Michael Hewson, the chief market analyst at CMC Markets UK.
“While the main focus was on the downgrades to its economic predictions, and the length of the recovery, what was particularly notable was [Jerome Powell’s] comments on the jobs market, inequality and financial markets,” Hewson said.
“He said that inequality was likely to continue for the next four decades, and that millions of people could well be out of work for some time.”
The declines in Europe and the US followed sharp losses for stocks in Asia.
Japan’s Nikkei (^N225) closed more than 2.8% in the red, in its worst decline since the beginning of May.