The world’s largest economic superpower America’s economy is seen in danger. The US Federal Reserve seems to be cowering in the face of stubborn inflation. Despite the earthquake in America’s banking sector, the US central bank has considered inflation as a big threat and has increased the interest rates once again. This time the market, which was expecting relief, did not like this announcement and on Wednesday, there was a sharp decline in all the markets of America.
Interest rates increased by 0.25 percent
The US Reserve Bank has been aggressively raising interest rates since April last year. The Reserve Bank wants to bring down the inflation rate below 2 percent, which is currently more than 6 percent. Meanwhile, last night the Federal Reserve raised interest rates by 25 basis points. Even before this, the Federal Reserve had increased by the same amount in January. After this announcement by Fed, the interest rate has now increased from 4.75% to 5%.
Interest rates increased amid banking crisis
Recently two big US banks Silicon Valley Bank and Signature Bank went bankrupt. Apart from this, 186 banks of America are facing crisis. The banking sector was hoping that after this the Federal Reserve could give them relief by cutting interest rates, their hopes were dashed. Despite the banking crisis, instead of giving relief, the US Federal Reserve announced an increase in the interest rate. The Federal said that the interest rate could be raised one more time this year.
Increased danger on India too
After this decision of the US Fed, there has been pressure on the Reserve Bank of India to increase the interest rates. Along with this, there is a possibility of increase in FII withdrawal from the Indian stock market. The Indian Rupee is already under pressure, and looks desperate to break the 83 level. The Fed’s decision will strengthen the US dollar, which will make many developing economies, including India, feel the heat.
Big fall in US markets
As soon as the decision of the US Fed came to the fore, the sentiment of the investors in the stock market got weak and due to the fierce selling, all the indices of America fell on their face. The S&P 500 slipped 0.4% during trading. At the same time, the Dow Jones Industrial Average was at 32,378 with a decline of 181 points or 0.6% till 3:06 pm. Whereas the Nasdaq Composite was trading at a loss of 0.2%.
Inflation will make you cry even further
The big question now is how long the Fed will continue to raise interest rates. The Federal Reserve said that their responsibility was to control inflation. Increasing the interest rate to control inflation. The Federal Reserve said that preventing inflation is their main focus. He said that there may be an increase in interest once again this year. Bond yields start to rise as interest rates increase by the US Federal. Due to which banks suffer loss in bond investment.