Federal Reserve Sees More Interest Rate Hikes Coming This Year After June Pause; Dow Dips
16.06.2023 - 04:04
/ deadline.com
The Dow Jones nosedived this afternoon as the Federal Reserve – which has raised interest rates ten times since last year – held them steady for June but indicated that more hikes are on the way.
A pause in the aggressive increases meant to stem inflation was expected, but hawkish commentary in a statement out of today’s Fed meeting wasn’t. A majority of governors are in favor of raising rates again this year and two more increases are expected. The Fed gave a target 5.6% terminal rate, or where it wants the number to settle. Chairman William Powell just wrapped a press conference to take questions on the Fed’s thinking.
The DJIA reversed course on the news, turning lower by nearly 400 points midafternoon. It’s off its lows. The Nasdaq and S&P 500 — both off by about half a percentage point on the annnouncement — also recovered somewhat but were jittery as Powell spoke.
In its press release today, the Federal Open Market Committee said, “Recent indicators suggest that economic activity has continued to expand at a modest pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.”
Hikes are increasingly controversial, however, especially after some of the nation’s biggest bank failures ever this year starting in March and related to high interest rates. Also, annual inflation cooled in May to 4%, the slowest growth in more than two years, raising market hope the Fed might lay off interest rates beyond June. Still, core inflation is still double the Fed’s target of about 2%.
Powell said the July would be “a live meeting.”
“We have to get it down to 2% and we will. But we just don’t see that yet,” Powell said at the presser, talking of inflation.
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