Following the latest rate hike, Chair Jerome Powell made comments that affected the market. The Federal Reserve increased interest rates by a quarter percentage point, resulting in the benchmark funds rate rising to 5% to 5.25%. The central bank’s post-meeting statement appeared to soften its language on future rate increases by removing the line on “additional policy firming.” However, Powell clarified in his press conference that the policy-setting committee believed it would take time for inflation to decrease and that it would not be appropriate to cut rates.
Following Powell’s press conference, the major stock averages turned lower, with investors focusing on his comment that the rate-setting committee expects inflation to come down slowly. Powell stated that in that scenario, it would not be appropriate to cut rates, and they would not do so. As of 3:45 p.m., the Dow Jones Industrial Average was down by 245 points, the Nasdaq was lower by about 0.3%, and the S&P 500 was down 0.5%.
Powell also addressed the run on Silicon Valley Bank, stating that it was historically unprecedented and would need to be addressed by regulators in the future. Powell noted that he was not aware of anyone thinking that this could happen so quickly and that it would be up to Vice Chair Michael S. Barr to lead in designing ways to address such events.