Lat­est Fed pol­icy state­ment sends stocks lower

New Haven Register (New Haven, CT) - - BUSINESS -

U.S. stocks fin­ished lower as the Fed­eral Re­serve struck a some­what hawk­ish tone in its lat­est pol­icy state­ment. Trea­suries fell, while the dollar re­treated af­ter spik­ing to ses­sion highs. Other ma­jor cur­ren­cies fluc­tu­ated as in­vestors ab­sorbed the first of three big cen­tral bank re­ports this week.

The Fed­eral Open Mar­ket Com­mit­tee on Wed­nes­day raised rates and sig­naled it may pick up the pace of in­creases this year as un­em­ploy­ment falls and in­fla­tion flirts with tar­get lev­els. Ten-year Trea­sury yields briefly crossed the 3 per­cent thresh­old af­ter the an­nounce­ment. The S&P 500 In­dex closed near its low for the day.

“The FOMC is now sig­nal­ing two more hikes this year and has dropped its in­creas­ingly stale sig­nal to mar­kets that rates will re­main for some time be­low those lev­els ex­pected in the long term,” James McCann, global econ­o­mist at Aberdeen Stan­dard In­vest­ments, said in a note. “This shift re­flects the ro­bust do­mes­tic growth back­drop, which is be­ing fer­mented by a late-cy­cle fis­cal stim­u­lus.”

Fed Chair­man Jerome Pow­ell told re­porters that un­em­ploy­ment and in­fla­tion are both low, and that rais­ing rates too slowly or quickly could be harm­ful. He added that the bank won’t over-re­act to in­fla­tion lev­els above 2 per­cent. Pow­ell also an­nounced he would hold press con­fer­ences at every Fed meet­ing start­ing in Jan­uary.

The euro dropped af­ter the Fed de­ci­sion only to re­cover to ses­sion highs. The pound also erased losses from a post-Fed swoon. The Euro­pean Cen­tral Bank will de­cide rates on Thurs­day — no change is ex­pected but in­vestors will be braced for news on a po­ten­tial end to the re­gion’s quan­ti­ta­tive-eas­ing pro­gram. The Bank of Japan re­ports Fri­day.

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