The Fed raised interest rates, Wall Street immediately sank
Stock prices on Wall Street fell last night after the US central bank raised interest rates and its president Jerome Powell's message that he does not expect to cut them until the end of the year. The Dow Jones slipped 1,63 percent to 32.030 points, while the S&P 500 fell 1,65 percent to 3.936 points and the Nasdaq fell 1,60 percent to 11.669 points.
As expected, Fed leaders decided at the two-day meeting to raise key interest rates by 0,25 percentage points, to a range of 4,75 to 5 percent. This is the ninth rate hike since the Fed began tightening monetary policy in March last year, but the pace of increases has slowed.
The announcement of the central bank indicates that due to problems in some banks, a pause in the increase of interest rates is possible, but that due to high inflation, the monetary policy will probably have to be adjusted further.
After the Fed's announcement, stock indexes rose, but fell sharply after the central bank president's messages.
"The market was encouraged by the Fed's message that a pause in rate hikes was possible, but was disappointed by Powell, who said the Fed's hands were not tied and that it would be able to raise rates further if necessary," explains Chris Zaccarelli, director of the Independent Advisory Alliance.
The tightening of financing conditions means that there will be a reduction in lending and consumption, and thus a slowdown in economic growth, analysts say.
After two days of gains, the SiP banking sector index fell more than 3,5 percent yesterday, as several regional and local banks remained under pressure from depositor mistrust.
In addition, Treasury Secretary Janet Yellen said in a report to Congress that a government guarantee of all bank deposits is not being considered.
This disappointed investors who hoped that due to the banking crisis the state would decide to guarantee all deposits, not just up to $250.000.
And on European stock exchanges, share prices rose yesterday. The London FTSE index strengthened by 0,41 percent, to 7.556 points, while the Frankfurt DAX rose by 0,14 percent, to 15.216 points, and the Paris CAC strengthened by 0,26 percent, to 7.131 points.