Federal Reserve Rate Hike Triggers Late-Session Sell-Off
The Federal Reserve raised its benchmark federal funds rate by 25 basis points on September 16, bringing the target range to 3.75%-4.0%. The move was met with a late-session equity sell-off and higher Treasury yields, as markets had expected the increase but not the subsequent decline.
The Dow Jones Industrial Average dropped 631 points, a 1.2% decline, while the S&P 500 fell 0.45%. The Nasdaq held essentially flat. This was the first rate hike since July 2023, and the decision wasn’t close, with the FOMC voting 12-0 in favor.
Fed Chairman Kevin Warsh emphasized the central bank’s commitment to returning price growth to its 2% goal, saying ‘inflation is too high.’ The updated economic projections from the meeting showed that 16 of 18 committee members see more tightening ahead, with at least one additional quarter-point hike expected before year end.