The Federal Reserve didn’t pull any rabbit punches on the capital markets by raising interest rates another 25 basis points to a range of 2.25 to 2.50 on Wednesday. Following the decision, Federal Reserve Chairman Jerome Powell communicated that the central bank sees “growth moderating ahead.”
The stock markets’ latest declines didn’t veer the Fed off their rate-hiking path. The Dow Jones Industrial Average and S&P 500 are down 9.37 percent and 11.57 percent, respectively, in the last three months.
Meanwhile, the tech-heavy Nasdaq Composite has lost close to 14 percent within the last three months of what’s been a volatile market for U.S. equities. Nonetheless, backed by a solid economic growth and a strong labor market, the Fed forged on with hiking rates.
The markets have certainly taken a turn for the worst since September’s rate hike, and the Fed Chair did indeed recognize the change. Rather than completely ignore the latest market oscillations, Powell took these factors into account at the post-rate-hike presser, saying that “cross currents have emerged” and “financial market volatility” has increased.
Global Growth is Slowing
In fact, Powell acknowledged the global growth concerns that have been reverberating through the capital markets. With the trade war between the United States and China ongoing despite the latest tariff ceasefire, global economies are beginning to show signs of retreating.
“Growth in the economies have moderated around the world,” said Powell, as Europe and China recently released weaker economic data.
Despite the dovish tones, Powell did manage to sing the praises of the current economy. Backed by data showing solid growth and a robust labor market, Powell mentioned that the “U.S. economy has continued to perform well” and “signs of a more robust economy proved accurate.”
However, Powell is quick to point that “there’s a mood of concern going forward” from businesses that the Fed has been speaking with regarding the current state of the economy.
Following Powell’s speech, the Dow Jones Industrial Average fell by over 400 points after starting the session up over 200 points. The S&P 500 as well as the Nasdaq Composite followed the Dow into the red 40 points and 150 points, respectively.
Unfazed by President Trump Comments
As has been the norm, U.S. President Donald Trump has been throwing barbs at the Fed following a sharp decline in the markets. Powell said “political considerations have played no real part in our decisions regarding monetary policy.”
Furthermore, he reiterated that the Fed will “do our jobs the way we’ve always done.”
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