Wall Street dimmed post-FOMC decision

After the US Federal Reserve kept key interest rates unchanged and revised economic projections higher, Wall Street declined even as Fed Chair Jerome Powell warned the battle against inflation was far from over.

All three major US stock indexes whipsawed in the wake of the announcement and the accompanying Summary Economic Projections (SEP) and dot plot, which see an additional 25 basis point rate hike this year, peaking in the 5.50%-5.75% range. The projections also called for 50 basis points of rate cuts next year.

The updated projections see the Fed funds target rate edging down to 5.1% by the end of next year and to 3.9% by the end of 2025. The Dow Jones Industrial Average rose 148.43 points, or 0.43%, to 34,666.16, the S&P 500 lost 3.86 points, or 0.09%, to 4,440.09, and the Nasdaq Composite dropped 49.03 points, or 0.36%, to 13,629.15.

Since the Fed embarked on its current tightening cycle in March, core inflation has cooled, but the progress of its descent toward the central bank’s target has been slow and uneven.

The SEP forecasts inflation to drop to 3.3% by year-end, and to approach the central bank’s average annual 2% target. Fed Chairman Jerome Powell tempered rosier economic projections with a warning that inflation has a long way to go before reaching that target.

Among the 11 major sectors of the S&P 500, interest rate sensitive communication services and technology suffered the largest percentage losses.