Today the global business environment moved a step forward as the United States Federal Reserve gave a stunning move in its monetary policy. This has led to a lot of changes in prices of shares in financial markets around the globe, the exchange rates of currencies as well as the prices of various commodities.

The Federal Reserve Chair Jerome Powell during a press conference that shocked many analysts left announced that the central bank would be increasing the pace through which it would implement interest rate hikes. This decision has been made following constant inflation rates which were beyond Fed’s expectations in the initial years. The statement is somewhat a shift from the previous tone the Fed had adopted warning of a more gradual process of tightening of the money supply.

These, as the subsequent consequences of this news, affected stock markets all across the world immediately. This was the case with the benchmark indices in America where S&P 500 and Nasdaq Composite saw a slump and especially the technology as well as the growth stocks. Concerns over increase in interest rates have seen investors change their outlook with regards to the pricing models of high-growth firms most of which have originated from the low interest rate regime recently witnessed.

Similarly, the European markets also cut down their Business European markets also cut down their losses despite a stock rise among the key markets of London, Frankfurt and Paris. This left the pan-European STOXX 600 index 0. 8 per cent lower, its largest single-day decline in six months, due to debt concerns and the prospects of a tighter monetary policy in the United States, the world’s largest economy.

Similarly, markets in Asia also declined with the Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index going down. The repercussion of the given decision is the indication of the interdependency of the world financial systems and the capacity of the US central financial institution to shape global standards for economic performance.

The currencies moved within the currency markets dramatically following the announcement. The US dollar rose to its highest level in two years rising from its recent positions against other major currencies. This has exerted pressure on the emerging Market Currencies particularly the developing nations that rely on dollars to service their dollar based debts.

In the commodities market for instance we noticed that the gold prices were high following cases where investors were running to safe haven investments. Although, the rising dollar weakened other currencies and this led to the formation of downward pressure on the prices of gold. Fluctuations in oil prices were also recorded where concerns relating to growth in the global economy affected demand forecasts.

A similar policy shift in the Fed has consequences which impact the non-financial world as well. Houses and companies are now holding their diversified strategies possibly in response to future changes in borrowing costs and currency exchange rates. Larger organisations with a lot of global activities could experience some problems in controlling their supply chain and their pricing policies as the economic climate turns volatile.

Opinions of the economists and other market professionals remain split on the future consequences of the decision of the Fed. To some analysts, monetary policy has been taken to a more aggressive approach as a way of preventing over-heating in the United States economy and ensuring that inflation is kept under check. Some critic to worry that a premature move toward a tighter monetary policy may strangle the growth of the economy and even pull the economy back into contraction.

Due to the changes that the US central bank is making, other major economies’ central banks are now forced to review their own monetary policies. Especially the European Central Bank and the Bank of Japan find themselves in difficult position as they have to weigh between committing to the support of the economic recovery and the prospect of drifting further away from the policies set by the Federal Reserve.

Thus, instability may persist in the near future, and at least unless markets fully absorb the new information that appeared earlier in the day. Both the investors and managers, analysts and economists will be paying a particular attention to economic indicators and decisions made by the central banks as for more information concerning the likely changes of monetary policies.

This simple act by the Fed is as a wake up call of the reality that the global forces are complicated and not easily predictable. As corporations find themselves operating in this environment, flexibility marked by proper risk management will be crucial for them. What could be expected in the following months is that more market adjustments are expected to happen in the coming months as everyone adapts to this new situation that permits market movers to look for good breakthrough opportunities when the shifting of the economic tides occur.