Dow plunges 660 points in biggest drop since 2011 amid fears that the Federal Reserve may be forced to act more aggressively to cool down the economy

Friday, February 2, 2018
By Paul Martin

The stock market had its sharpest drop since 2011 on Friday over fears about the Federal Reserve raising interest rates
The Fed may have to raise interest rates to cool down the economy, which has heated up faster than investors expected
The last time this happened was in 2011 when the US’ debt was downgraded
Dow Jones industrial average fell more than 660 points by 3pm

2 February 2018

The stock market had its sharpest drop in seven years on Friday amid fears the Federal Reserve may act aggressively to force the economy to cool down.

The Dow Jones Industrial Average fell by more than 660 points by the time it closed on Friday afternoon.

This fall marked the stock market’s worst week in two years.

The last time the index shed this many points in a single day was on August 8, 2011. That time it happened because Standard & Poor downgraded the United States’ dept from sterling AAA credit rating over partisan brinkmanship.

But, it came on the back of good news about the United Sates Economy.

The country saw a 200,000 job increase in January, and wages rose by 2.9 percent, according to the Post.

Wage increase is good news for workers – but can also be a sign that inflation might be coming.

That news sparked the drop – which started with a selloff in government bonds.

People started selling because they were worried the Federal Reserve might raise interest rates four times this year to combat potential inflation.

The central bank predicted the Fed would only have to raise it three times.

That decision would come if the Federal Reserve decided to act rashly to cool down the economy because it is hearing up much more quickly than investors expected.

Increased interest rates make it more expensive for companies and individual to borrow money, and make the money borrowed more expensive.

Stocks then continued to fall throughout the day, hitting their lowest points around 3pm.

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