Fed Raises Interest Rates for First Time in Three Years

The Federal Reserve raised interest rates for the first time in three years, sparking a mixed reaction on Wall Street. The S&P 500 fell 0.4% and the Dow Jones Industrial Average dropped 1.2%, while the Nasdaq composite was nearly unchanged.

Investors generally prefer lower interest rates because higher rates slow economic growth and undercut stock prices. However, Fed Chairman Kevin Warsh said inflation remains too high and the economy appears to be strengthening, which could imply it can withstand more rate hikes.

The median forecast from Fed officials suggests the federal funds rate will end this year at 4.1%, up from its current range of 3.75% to 4%. Traders are betting on a higher probability of a rate hike to 4.25% to 4.50% by the end of the year.

Banks, including Huntington Bancshares and JPMorgan Chase, fell sharply as a slower economy could mean less demand for loans. Oil companies also weighed on the market after Brent crude prices dropped 2.7% to $105.83.