Wall Street closed this week again in the red, thus accumulating two in a row caused by fear of a possible recession after the increase in interest rates by the Federal Reserve (Fed) and the European Central Bank to combat inflation.
In detail, the Dow Jones of Industrial –the main indicator of the New York stock market – varied 1.7% while the selective S&P 500 fell 2.1% and the technological Nasdaq, 2.7%.
Although Wall Street started the week with moderate gains after learning that inflation in the United States fell to 7.1% in November, the Fed curbed these margins by raising interest rates by 0.50%, which are now between 4.25% and 4.5%, ending the confidence of investors, who expected less aggressive monetary policies.
“I wish there was a completely painless way to restore price stability, but there isn’t”he pointed out Jerome PowellChairman of the Fed, after announcing that the interest rate reached its highest level since December 2007.
Along these lines, the central bank of the North American giant will continue raising interest rates, since controlling inflation will take longer than expected.
Why is Wall Street afraid of rate hikes?
Wall Street believes that policies to cool the economy would end up generating a recession, a scenario that has already been ruled out by the Fed.
However, the rise in interest rates is already affecting the demand for sectors such as housing.
Likewise, the Federal Reserve of the United States increased its estimates of inflation of 2.8% to 3.1% for next year, and would close the current year at 5.6%.
Finally, with regard to economic growth, a ratio of 1.2% is no longer expected, but only 0.5%.
Source: Larepublica
Kingston is an accomplished author and journalist, known for his in-depth and engaging writing on sports. He currently works as a writer at 247 News Agency, where he has established himself as a respected voice in the sports industry.
