The Federal Reserve scares the stock markets with a possible advance of the rate hikes to stop inflation

The day was placid. The US Dow Jones index, which groups 30 of the largest companies in the country - including Apple, Microsoft or the JPMorgan bank - added a new all-time high this Wednesday to the many that it already achieved during the buoyant 2021, but at around the eight in the afternoon Spanish time, when there were two hours until the close of the session, everything began to go wrong. The publication of the minutes of the December meeting of the monetary policy committee of the US Federal Reserve unleashed the storm by revealing that its members agreed that an interest rate hike may be necessary "before, or at a later date. faster pace ”to contain inflation.

Investors expect three increases in interest rates by the Fed this year, but the acceleration of the calendar of withdrawal of stimuli that the notes of the meeting reveal indicate a turn towards more orthodox positions that has taken the markets by surprise. The Dow Jones immediately turned around and closed more than 1% lower, the S&P 500 fell almost 2%

while the Nasdaq technology sank more than 3%.

The cascade of red numbers continued as the hours passed. The Japanese Nikkei fell during the European early morning by almost 3%. And in the Old Continent the losses were imposed during the morning of this Thursday, although with less intensity: the Eurostoxx 50 was around a decrease of 1%, similar to those of the Frankfurt and Paris parks. The Spanish Ibex 35 is one of the best resists: after a more hesitant start, only half a point is left thanks to the boost from tourism-related stocks such as IAG and Meliá Hotels, and the good behavior of banks - those who benefit from the interest rate hikes.

The minutes reflect the feelings of the Fed's components three weeks ago, when omicron had not yet deployed its entire arsenal of contagions, but they reveal that the fear of inflation is greater than that of a slowdown in economic growth. The word omicron is cited nine times, but with no consensus on its potential impact. “Many participants pointed out that the appearance of the omicron variant makes the economic prospects more uncertain; several commented that they still did not see that the new variant would significantly alter the path of economic recovery in the United States ”.

Ten times the bottlenecks that strangle the offer are cited. Fed members warned that global bottlenecks in supply chains and labor shortages are limiting companies' ability to keep up with strong demand. And they are not optimistic about their end: they warned that they are more widespread than previously thought and will persist well into this year.

However, the good performance of the labor market, with the unemployment rate at 4.2%, close to what economists consider as full employment, has convinced the Fed that the economy of the world's greatest power is progressing adequately and you can go on your way without the crutches that provide the stimuli. When the first step is taken and how much you reduce your bond portfolio will show how inflation concerns outweigh omicron concerns. For ING analysts, March is "too early" to undertake that first rate hike due to the fact that the impact of the new variant is not yet known exactly, and they see it more likely to occur in May.

Inflation in the US touched 6.8% in November, the highest since 1982, almost 40 years ago. Therefore, it is not surprising that the word inflation appears 75 times in the Fed's minutes. At the meeting, several voices commented that it is being higher and more persistent than anticipated, and that price increases are being transferred to more and more products. . Issues cited include rising house prices and rents, more widespread wage growth driven by labor shortages, longer frictions on the global supply side that could be exacerbated by the omicron variant, and the idea, increasingly widespread among businesses, that they can charge the consumer the highest costs in labor and merchandise.

However, the perception of the Federal Reserve is that prices will relax over the course of the year, as supply problems are solved, although the latest rallies have led those responsible for US monetary policy to revise their forecasts upwards. inflation for this year and for the next, which has made the rise in the cost of living an evil to tackle.