US stocks shed gains on Wednesday after the Federal Reserve stated an interest rate could come by March. Wall Street was up by roughly two per cent until noon (local time) when Federal Reserve chairman Jerome Powell held a press conference after a two-day meeting.
“The Dow Jones Industrial Average closed down 0.38%, while the S&P 500 fell 0.15% and the Nasdaq Composite gained just 0.02%. The MSCI world equity index, which tracks shares in 45 nations, was largely flat,” Reuters reported.
Powell was quoted by Reuters as saying “The committee is of a mind to raise the federal funds rate at the March meeting assuming that the conditions are appropriate for doing so.” He also reaffirmed plans to end bond purchases in March.
“Subsequent interest rate increases and an eventual reduction in the Fed's asset holdings would follow as needed, Powell said, while officials monitor how quickly inflation falls from current multi-decade highs back to the central bank's 2% target,” Reuters reported.
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However, Powell said the Fed had yet to decide on the pace of the rate hikes. “Powell was explicit on one key point: That with inflation high and for now apparently getting worse, the Fed this year plans to steadily clamp down on credit and end the extraordinary support it has provided to the U.S. economy during the coronavirus pandemic,” Reuters reported.
Powell acknowledged that inflation had “probably gotten a bit worse”. He was quoted by Reuters as saying, “This is going to be a year in which we move steadily away from the very highly accommodative monetary policy we put in place to deal with the economic effects of the pandemic.”
