Stocks drop after Fed update
The Dow dropped more than 300 points at one point after the Fed’s update. With the Fed raising its inflation expectations and now seeing two rate hikes in 2023, investors decided to take risk off. The Dow was last down about 240 points. One bright spot was bank stocks with JPMorgan and Bank of America in the green. The 10-year yield jumped about 2 basis points to 1.52% after the decision.
Fed lifts inflation expectations, sees rate hikes in 2023
The Federal Reserve forecast increasing inflation in 2021 and saw rate hikes as soon as 2023, the Federal Open Market Committee said after concluding its two-day meeting Wednesday.
However, the Fed did not say when it will taper its bond-buying program. Traders will be waiting on details for that possibility from Powell’s press conference.
The central bank left its benchmark short-term borrowing rate anchored near zero.
— Hannah Miao
Market waits for policy moves, inflation outlook from Fed
The Federal Reserve is not expected to announce imminent changes to its asset purchases or its target interest rate on Wednesday, but the central bank’s wording and projections about future changes could move markets.
The Fed is slated to release its latest policy statement at 2 p.m. ET, along with updated economic projections. Those projections will include the so-called dot plot that shows how central bankers expect their target interest rate to change in the years ahead.
How the central bank and Chair Jerome Powell addresses inflation will also be a closely watched topic. Recent readings for consumer and producer prices have shown a hotter-than-expected rise in recent months. Powell will hold a press conference at 2:30 p.m. ET.
Shortly before the Fed’s statement was scheduled to be announced, the Dow, S&P 500 and Nasdaq Composite were down less than 0.5%. In the bond market, the benchmark 10-year Treasury yield slipped 1 basis point to just under 1.49%.