US markets ended lower on Wednesday after the Federal Reserve raised interest rates by 25 basis points and signalled that another increase could follow.
The decision came as policymakers raised their near-term inflation forecasts, while oil prices declined on easing concerns over Saudi supply disruptions and gold reversed earlier gains.
Fed hikes rates as inflation remains elevated
The Federal Reserve raised its benchmark overnight interest rate by a quarter percentage point to a target range of 3.75% to 4%.
The Federal Open Market Committee approved the decision unanimously in a 12-0 vote.
The Fed said economic activity was expanding at a solid pace, with resilient domestic spending, strong productivity growth and robust capital investment.
“Job gains have kept pace with the workforce, and the unemployment rate has changed little,” the FOMC said in its statement.
However, the central bank said inflation remained elevated and that the latest policy action would support a more timely return to its 2% objective.
The Fed’s projections showed that 16 of its 18 participants expect at least one more rate increase, while four see the possibility of two additional hikes. Two participants expect policymakers to stop after Wednesday’s increase.
Fed Chair Kevin Warsh has not submitted an individual dot since becoming chair. The projections show no additional rate increases in subsequent years, while officials expect one rate cut in 2028 and at least one in 2029.
Officials raised their 2026 inflation forecasts, with headline PCE inflation now projected at 3.7% and core PCE inflation at 3.4%. Both forecasts are 0.1 percentage point higher than the June projections.
The Fed expects inflation to return to its 2% target in 2029, while forecasting headline PCE inflation at 2.3% and core PCE inflation at 2.5% in 2027.
Warsh said monetary policy cannot directly lower oil prices or address supply disruptions.
“We can’t affect any individual price, whether it be oil prices, whether it be foodstuffs at the grocery store,” Warsh said.
He added that the Fed would seek to prevent changes in relative prices from spreading into broader inflation.
US stocks fall at market close
US stocks ended lower after the Fed decision and Warsh’s press conference.
The Dow Jones Industrial Average lost 630 points, or 1.2%, while the S&P 500 fell 0.5%.
The Nasdaq Composite ended the session near flat after all three major indexes had traded higher earlier in the day.
Financial stocks were among the biggest decliners. Bank of America and Wells Fargo each fell 3%, while American Express and Goldman Sachs also declined.
The 10-year Treasury yield moved back above 5% during Warsh’s remarks, with investors focused on the Fed’s assessment of persistent inflation.
Intel shares gained after a report that the company was in talks with South Korean memory chipmaker SK Hynix to build semiconductors in the US.
Oil prices retreat as supply concerns ease
Oil prices declined as reports of additional Saudi crude cargoes through Oman eased some concerns about Middle East supply disruptions.
Brent crude fell 3%, to $105.45 a barrel, while West Texas Intermediate declined 3.62%, to $102.
Saudi Arabia is offering additional crude loadings to Asian refiners through ship-to-ship transfers off Oman’s Sohar port, according to people familiar with the matter cited by Reuters.
UBS analyst Giovanni Staunovo said reports of Saudi exports through the Gulf suggested concerns over the scale of the disruption were easing.
Oil also faced pressure from US inventory data. The Energy Information Administration reported that US crude stocks fell by about 640,000 barrels last week, below expectations for a 1.62 million-barrel draw.
Gold retreats after Fed decision
Gold prices reversed earlier gains after the Fed raised rates and indicated that further increases remained possible.
Spot gold fell 0.69% to $4,263.22 an ounce after reaching a session high of $4,365.57 earlier. US gold futures for December delivery settled 0.65% lower at $4,304.50.
The dollar strengthened against the euro after the Fed announcement, putting pressure on gold by making the metal more expensive for overseas buyers.
Higher interest rates can also reduce the appeal of non-yielding bullion.
Silver fell 1.7% to $62.57 an ounce, while platinum declined 2.3% to $1,735.33 and palladium dropped 1.5% to $1,269.95.
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