Wall Street operates with volatility and a mixed trend before the Fed rate hike

This Wednesday, after the announcement by the United States Federal Reserve (FED) of its decision to increase interest rate of reference in 25 basic points and after the declarations of Jerome Powell, president of the organism, the main indices of the The New York Stock Exchange reacts mixed and with strong volatility, in a day in which the market expected definitions in this sense.

And it is that the international banking crisis, which is closely linked to the rate policy of the organization, is due to the fact that the affected banks had acquired long-term bonds and began to have problems with their yields, which led them to have a mismatch of rates and term. In this context, the expectation was set on whether the Fed would maintain the aggressive monetary policy that it had been implementing or would moderate it. And finally, this Wednesday, the decision was made known: the rate went up.

Following this news, the index S&P 500 falls 7.47 points to 3,995 (-0.19%)he Dow Jones it sinks to 32,441.57, down 119.03 units (-0.37%) and the nasdaqwith a strong technological component, gains 29.19 points (+0.25%) and stands at 11,889.30.

This afternoon the definitions of the Fed on interest rate hikes. And, as Powell explained, the decision was due to the fact that the leading body assessed that what happened with the banks is not due to a general problem, but rather is related to a failure in the direction of the Silicon Valley bank (SVB), which triggered the banking crisis.

The problem was that the fall of that entity generated fear of a contagion effect that affected other entities and, in the midst of this situation, the Credit Suisse bank, which had been badly affected, was affected.

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The Fed faced a crossroads: if it raised the interest rate by a large amount, ran the risk of severely affecting the level of activity, asset prices and disable incentives for investment, which could lead to the start of a recessive cycle.

But, on the other hand, if he chose a path of adjustment of a slower pace and size, he faced the danger of having to live with a rate of inflation for a long time.which in the long term will also affect the level of activity, the price of assets, the value of the dollar, and may also end in a recession.

Finally, it was confirmed what the Most analysts expected and the institution continued raising its official interest rates by 0.25 percentage pointsto just below 5%, as it did at the last meeting.