U.S. stocks fell on Wednesday after the Federal Reserve held interest rates steady after 10 straight hikes.
Wall Street’s benchmark S&P 500 edged down 0.3% in choppy afternoon trading, while the tech-heavy Nasdaq Composite lost 0.1%
The moves came after the US central bank announced a widely expected decision to hold the federal funds rate steady, keeping its target range between 5% and 5.25%.
The pause follows a string of back-to-back rate hikes from a near-zero 14-month base as the Fed moved aggressively to tackle persistently high inflation.
But the Fed’s decision on Wednesday was released alongside an updated “dot chart” that pulls together officials’ forecasts for the federal funds rate through the end of 2025, indicating most policymakers expect two more quarter-point increases this year.
In government debt markets, the policy-sensitive two-year Treasury yield stabilized at 4.71%. It had previously risen more than 0.1 percentage point just after the central bank’s policy announcement, hitting its highest level since mid-March.
The yield on the benchmark 10-year note fell 0.04 percentage points to 3.8%. Yields move inversely to prices.
Data released earlier on Wednesday showed U.S. producer prices rose 1.1% year-on-year in May, less than economists had expected and the smallest increase in more than two years.
“A pause at this point is a wise move on the part of the Fed,” said Matthew Morgan, head of fixed income at Jupiter Asset Management, “given that inflation is slowing and the 5% rise in rates have already been consolidated in the economy at the fastest pace for four decades is felt.
“The true impact of these hikes has yet to be felt, but we are already seeing pockets of fragility.”
The dollar was down 0.3% against a basket of six other currencies following the Fed’s decision, paring a steeper decline earlier in the day that took the greenback to its lowest level in four weeks.
On Tuesday, the latest reading of the consumer price index in the United States showed that headline inflation had also slowed – with a year-on-year rise of 4% in May, compared to almost 5% in April.
Ahead of the U.S. central bank’s rate decision on Thursday, Mohit Kumar, chief financial economist for Europe at Jefferies, said: “The Fed wants to take a break and would need a strong reason to change this point. seen.” Kumar noted that the inflation report “did not provide that reason.”
Elsewhere in the stock markets, the European regional Stoxx 600 and the German Dax both rose 0.5%.
The pound rose to its highest level against the dollar since April 2022 after strong data on gross domestic product and labor in the UK this week boosted the chances that the Bank of England will continue to raise the interest rate. The pound gained as much as 0.6%, hitting $1.2698, according to Refinitiv data, before narrowing its lead to trade 0.4% on the day.
Asian stocks were mixed, with Japan’s benchmark Topix index up 1.3%, while China’s CSI 300 index was flat and Hong Kong’s Hang Seng index lost 0.6%.
Stocks in China were buoyed earlier in the day by rising hopes of policy support from the People’s Bank of China after the central bank cut its short-term lending rate on Tuesday for the first time in nine months.
Goldman Sachs analysts said the move “could suggest the start of further monetary policy easing” and expected the PBoC to cut its one-year medium-term lending facility rate to 0 on Thursday. .1 percentage point. The rate serves as a floor for China’s benchmark prime rate.