Markets sink after Yellen hints at early rate rise

Stockmarkets around the globe have fallen after Federal Reserve chair Janet Yellen suggested the central bank could lift interest rates in early 2015.

Speaking after the Fed confirmed that it will taper quantitative easing by another $10bn a month, Yellen said the bank could start to raise interest rates as soon as six months after the bond-buying programme comes to an end.

Asked how soon rates would rise after the end of QE, Yellen replied: “This is the kind of term it’s hard to define. Probably means something on the order of six months, or that type of thing.”

If the Fed continues to taper QE as expected, this suggest it could look to lift rates around April 2015.

The news rattled markets. In the US, the Dow Jones sank 0.70 per cent to 16,222.17 while the S&P 500 ended the session down 0.61 per cent at 1,860.77.

Asian shares sold heavily off on the news, with Japan’s Nikkei 225 closing 1.65 per cent down to 14,224.23, Hong Kong’s Hang Seng Index dropping 1.79 per cent to 21,182.16 and the Shanghai Composite falling 1.40 per cent to 1,993.48.

Yellen’s comments also heralded market falls on this side of the pond in early trading, as the FTSE 100 fell 1.14 per cent to 6,498.16 by 1042 GMT while the Euro Stoxx 50 dropped 0.74 per cent to 3,053.66.