The Federal Reserve raised the interest rate by 25 basis points on Wednesday as expected, bringing its borrowing rates to 5.25% from 5.00%. This is the Fed’s 10th hike in 14 months to take interest rates up from near zero in March 2022. This is also the highest level in 16 years.
The market was disappointed as the Fed Chair Jerome Powell ruled out a rate cut, saying that he did not expect inflation to come down quickly enough.
“In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the Fed said in a statement.
However, the market did pick up some positive signs as this time, the central bank appeared to have softened tone on the potential rate hikes in the future unlike what it said in its post-meeting statement in March.
The Dow Jones Industrial Average settled lower by 270.29 points or 0.80% at 33,414.24. The S&P 500 fell 0.70% to 4,090.75. Meanwhile, the tech-heavy Nasdaq Composite decreased 0.46% to close at 12,025.33.
