Wall Street Falls After New Fed Rate Hikes

On Wall Street, stock indices fell for the third consecutive day on Wednesday after the U.S. central bank raised interest rates again and indicated that a pause in the tightening of monetary policy may follow.

The Dow Jones weakened by 0.80 percent to 33,414 points, while the S&P 500 slipped by 0.70 percent to 4,090 points, and the Nasdaq index fell by 0.46 percent to 12,025 points.

As expected, at the regular meeting, Fed leaders raised key interest rates by another 0.25 percentage points to a range of 5 to 5.25 percent.

This was already the tenth consecutive rate hike, but the central bank signaled that a pause in the cycle is likely until the effects of the increased cost of money are seen.

However, this does not mean that the cycle of rate hikes is over, as central bank president Jerome Powell stated at a press conference that further increases are possible if necessary. Decisions will be made at each subsequent meeting.

Powell stated that inflation is easing, but there is still a long way to go to the target level of 2 percent.

– “We believe that inflation will not come down that quickly. It will take some time, and in such a situation, it would not be appropriate to lower rates, and we will not do that,” Powell said.

He also indicated that economic growth is slowing and that it currently seems more likely that it will ‘soft land’ rather than plunge into recession.

While the Fed’s rate hike was expected, investors were disappointed by the messages that the cycle of tightening monetary policy is not yet over and that a rate cut cannot be expected anytime soon.

In recent weeks, stock prices have risen thanks to, among other things, speculation that the Fed would end the rate hike cycle at this meeting and that it would start cutting rates by the end of this year.

– “Those who hoped for such a scenario are disappointed because it does not seem that it will materialize,” says Alan Lancz, president of Alan B. Lancz & Associates.

Meanwhile, European stock prices rose yesterday. The London FTSE index strengthened by 0.20 percent to 7,788 points, while the Frankfurt DAX rose by 0.56 percent to 15,815 points, and the Paris CAC increased by 0.28 percent to 7,403 points.