Wall Street’s major stock market indexes experienced losses on Wednesday after the US Federal Reserve (Fed) announced an interest rate hike. The S&P 500 index fell 0.7%, while the Dow Jones Industrial Average and the Nasdaq declined by 0.8% and 0.5%, respectively, according to the Associated Press.
The Federal Reserve raised interest rates to the 5.00% to 5.25% range, an expected increase of 0.25%. This move is expected to further slow the economy and control inflation. There is speculation that this increase could mark the end of a series of 10 consecutive interest rate hikes.
Although the Fed removed the phrase used in previous releases indicating that “some additional rate hikes” may be necessary, it did not officially declare an end to this measure. The agency will consider various factors to “determine the extent to which” future hikes might be necessary, it said.
Fed Chairman Jerome Powell highlighted the central bank’s “significant change” in his latest announcement. Although stock traders expect rate cuts later in the year to boost the market, Powell expects this will not happen so quickly.
The Fed is in a delicate position as inflation is well above the 2% target and is mainly affecting low-income households. The next policy meeting in June does not guarantee that it will keep rates steady. Although the risk of recession is increasing, Powell is hopeful that it can be avoided.
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