Federal Reserve hikes interest rates by quarter percent
Policymakers at the Federal Reserve concluded their two-day meeting on Wednesday choosing to raise interest rates by expected 0.25%. Wall Street rebounds.
Investors were anxiously awaiting how the Federal Reserve would move forward with interest rate hikes on Wednesday sending share prices lower in morning trading. Markets had been buoyed over the past month on the back of improving economic outlook and building confidence that policymakers at the central bank can achieve a soft landing.
All three major indexes were trading lower in the hours before the central bank’s announcement, with the Dow Jones Industrial Index off by more than 350 points, a drop of over 1 percent. The S&P 500, which had its best January showing since 2019, was down over half a percent, more than 20 points.
Despite a Labor Department report on Wednesday showing that job openings ticked up, even though the policymakers are working to soften the strong demand, the Fed followed through with a quarter percentage point hike. In a statement, the central bank signaled that further rates will be coming saying “anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
Markets rebound after comments from Fed Chair
The news from the Fed to implement its lowest rate hike since March last year, after the most aggressive rate hikes sine the 1980s to slow four-decade-high inflation, led to an initial surge. However, the rise was brief as hopes that the central bank would stop raising were dashed by policymakers signaled that rate hikes would continue.
But the indexes recovered, gaining ground as Federal Reserve Chairman Jerome Powell spoke to the press. “He had an opportunity to relay a hawkish message and didn’t take it. He could’ve said that markets are getting overly excited and he didn’t take the opportunity,” Angelo Kourkafas, investment strategist at Edward Jones told Reuters. “Instead he said a lot of tightening has already happened.”
All three indexes finished the day with gains, the S&P 500 was up nearly 1 percent closing at its highest level since 25 August, and the Nasdaq racked up a 2 percent gain.