Wall Street has two interest rate problems these days. One of them is the Fed’s interest rate hike, which is turning more aggressive. The other is the interest rate hikes across the Atlantic, with the Bank of England hiking interest rates for a fifth time this week, and the European Central Bank (ECB) getting ready for hiking its own rates. According to the official communication that followed its regular meeting last week, the euro zone's central bank will begin raising interest rates next month, ending free money.

Like the Fed, the Bank of England and the ECB are facing a spike in inflation. It's currently running at an annual rate of 9% in the UK and 8.1% in the eurozone, well above the official targets of 2%. "High inflation is a major challenge for all of us," said ECB during its official announcement. "The Governing Council will ensure that inflation returns to its 2% target over the medium term."

How? By ending Quantitative Easing (QE), which includes the termination of the net asset purchases under its asset purchase program (APP) effective July 1, 2022. And by hiking the euro zones' official short-term interest rates.

Like the Fed, the Bank of England and the ECB has been too slow to abandon its accommodative policy, and it's "behind the curve." Euro zone debt markets have already responded to rising inflation, pushing bond yields in the region higher. In essence, markets have been doing the job of central banks, risking losing credibility among bond traders and investors. For instance, the German 10 year bond — a benchmark for euro zone long-term interest rates — is currently trading with a yield of 1.40%, a big turnaround from last August when it was yielding — 0.40%.

What does a hike in the U.K. and the euro zone interest rates mean for Wall Street? Several things. First, though still behind the U.S. rates, rising European rates will narrow the gap between European and U.S. interest rates, making investing in U.S. assets less appealing among European investors. That would slow the capital flows from Europe to the U.S., depressing U.S. Treasury bond prices and pushing yields higher.

Second, the slow-down of European capital flows to the U.S. will help ease the dollar rally, which has a couple of positive effects on the U.S. economy, like the rise of U.S. exports to Europe and the decline in imports. They will help the American economy avoid a recession. But it could worsen inflation, as a weaker dollar makes imports more expensive.

Then there is the positive effect of a weakening dollar against the euro on the revenues and earnings of the U.S. companies that derive a significant portion of their profits from the eurozone, like America's high-tech giants. As a result, they have been warning Wall Street that the strong dollar will have a material impact on their financial performance in the current quarter.

Still, Tyler Tucci, Head of Research at SynerAI doesn't expect any dramatic impact of ECB's decision on Wall Street, as the euro zone's central bank's action comes too little too late.

"The ECB has finally acknowledged that there's a problem, but the move lower in EUR-USD throughout the day suggests 'too little too late,'" Tucci told International Business Times. "This combination of higher 10-year bond yields and lower EUR is a potentially dangerous combination for risk assets because it could push long-end U.S. treasury yields higher as well as the DXY, which is 58% EUR. That wouldn't be a bullish backdrop for risk."