September 22 financial breakfast: the Fed sent a signal to continue large-scale interest rate hikes, the dollar rose strongly to a twenty-year high
The dollar index traded near 111.36; the dollar rose strongly to a new two-decade high on Wednesday after the Fed raised rates by another 75 basis points and hinted at further massive rate hikes in the upcoming meeting. Gold prices rebounded as the Fed raised rates as expected and Treasury yields eased; crude oil fell nearly 1.5% to a nearly two-week low after the Fed raised rates sharply again to curb inflation, which could reduce economic activity and oil demand. Earlier in the session, oil rose more than $2 a barrel on concerns about the Russian draft before retreating on a stronger dollar and lower U.S. gasoline demand.
Commodities close: Brent crude futures closed 0.9 percent lower at $89.83 a barrel, the lowest close since Sept. 8, while U.S. crude fell 1.2 percent to $82.94, the lowest close since Sept. 7. U.S. gold futures closed up 0.3 percent at $1,675.70.
U.S. stocks closed: The Dow Jones Industrial Average fell 1.7 percent to 30,183.78; the S&P 500 fell 1.71 percent to 3,789.93; the Nasdaq fell 1.79 percent to 11,220.19.
Global Markets at a Glance
The major U.S. stock indexes closed lower on Wednesday in a saw-saw session, falling sharply in the final 30 minutes as investors digested the U.S. Federal Reserve's (Fed/FED) third mega-rate hike and its promise to continue raising rates in 2023 to fight inflation.
All three major indices fell more than 1.7%, with the Dow hitting its lowest close since June 17, and the Nasdaq and S&P 500 closing at their lowest levels since July 1 and June 30, respectively. The Federal Reserve ended its two-day meeting by raising its policy rate target range for the third time by 75 basis points to 3.00%-3.25%. Prior to the statement, most market participants expected a 75 basis point rate hike and only a 21% chance of a 100 basis point hike.
However, policymakers also hinted at further significant rate hikes in the future. The latest projections from policymakers show that the policy rate will rise to 4.40 percent by the end of this year, peaking at 4.60 percent in 2023. the projections in June were 3.4 percent and 3.8 percent, respectively.
The Fed added that it does not expect to cut rates until 2024, dashing investor hopes that the Fed would expect inflation to be under control in the near term in its dot plot. Policymakers now expect the Fed's preferred inflation gauge to slowly return to its 2 percent target in 2025.
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