Leading stock market indicators are felt quickly on Wednesday afternoon on a volatile trading day following the recent interest rate hike by the Federal Reserve.
The Fed raised its reference rate to 3.25%, the highest in 14 years.
“We must have inflation behind us,” Fed chief Jerome Powell said in a press conference. “I wish there was a painless way to do that – there isn’t.”
But the latest hike was mostly priced in in the market last week, as stocks fueled the same day, President Biden celebrated the passing of a bill to cut inflation.
However, Wednesday ended with the Dow Jones Industrial Average and S&P 500 plunging around 1.7% as the Fed announced plans to raise rates even higher than planned by the end of the year.
Now the Federal Reserve expects the base rate to reach 4.4% by the end of 2022, a significant increase compared to June’s forecast.
“Ultimately, the policy seems appropriate in an economic context,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “But investors should prepare for rough seas as aggressive Fed policies usually leave a path of destruction behind.”
With News Wire services
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