The Fed is staying on course, and the market did not react too strongly. While they kept the interest rate steady for now, one more hike is expected this year. Core inflation slowed in August but remains well above the Fed's 2% target, so they're not declaring victory yet. The Fed expects rates to peak at 5.75% while projecting fewer rate cuts in 2024. Everyday Americans are struggling as inflation outpaces incomes, stimulus funds dry up, student loans repayment restart, and gas prices rise again. More people are falling behind on bills as living costs outpace wages growth. It's unclear if further rate hikes will tame inflation without tipping more people into hardship and triggering a recession.
Stocks fell after the Fed decision, with the Dow losing 0.2%, the S&P 500 dropping 0.9%, and the Nasdaq falling 1.5% as surging Treasury yields weighed on interest-rate-sensitive tech giants like Microsoft, Apple, and Nvidia. Despite the broader market decline, recent IPOs like Instacart and Arm Holdings saw gains, signalling a return of confidence, while Pinterest rose on its new $1 billion share buyback program.
Gold prices retreated on Thursday as the US dollar and bond yields rose after the Federal Reserve signalled another rate hike this year. Market analysts say resilience in the economy with slowing inflation has increased expectations that the Fed funds rate could remain steady soon, which is supportive of gold prices going forward.
Oil prices fell over 1% on Wednesday as investors grew cautious after the U.S. Federal Reserve signalled further interest rate hikes this year, which could slow economic growth and dampen fuel demand. Crude inventories fell last week in line with expectations, but the draw was driven by strong exports rather than demand growth. Concerns remain about tight supply globally entering the fourth quarter, but additional Fed rate hikes could put downward pressure on prices going forward.
The U.S. dollar hit a six-month high even after the Federal Reserve pause due to the signal of another hike. The hawkish stance trigger Treasury bonds selloffs, with the 10-year yield reaching a 15-year peak, while expectations for Fed rate cuts in 2024 were dampened. Most Asian currencies tumbled in reaction to the Fed's hawkish outlook, though Investors are now focused on upcoming central bank meetings, including the Bank of Japan and Bank of England, both expected to raise rates.