The New York Stock Exchange also crashed after several positive days. The Dow Jones Industrials index, its leading gauge, lost 1.81%, on renewed fears that the US Federal Reserve could once again tighten its monetary policy.
The market got off to an optimistic start due to signs seen as positive for the financial business: it succumbed to wholesale inflation and economic activity data revealed a cooling that would prove two things: a soft landing for the economy and proof that monetary medicine was having an effect on the FED.
The good mood lasted until two Fed executives, considered “hawkish” because they advocated further interest rate hikes, said that US inflation was far from under control. Conversing with the Associated Press, Loretta Mester, “hawk” and head of the Cleveland FED, had assured: “We are not yet at 5% in terms of interest rates, we are not above 5%, which I think will be necessary given my forecast for the economy.” In doing so, he encouraged placing interest rates above the 5% to 5.25% range, in order to control inflation.
Mester argued that “the intervention in the economy is not finished” and that it is the Central Bank of the United States that must lead the way in continuing to raise rates, “since the intervention is having an effect”.
The Fed official stressed that, for this reason, it is important that more rate hikes continue, because this will definitively defeat “the highest inflation seen in the United States in the last four decades”. The views of two Federal Reserve officials who advocated continuing the aggressive policy of raising interest rates despite the fact that inflation is easing were also echoed.
Analysts say that Mester’s statements weren’t the only variables that influenced the numbers, they also influenced the retail sector sales data during the Christmas period, on which Tom Martin of Globalt Investments assured that “something is moving inflation and retail sales in the right direction.
To these claims, the analysts add that with the economy in recession and with tech giants like Microsoft and Amazon cutting jobs, the numbers won’t be very optimistic for the next few rounds.
Source: Clarin
