Fed Holds Interest Rates, Signals Year-End Hike; Wall Street Falls

The U.S. Federal Reserve decided to keep its benchmark interest rates unchanged, holding them steady in the 3.50% to 3.75% range for the fourth consecutive meeting. This decision, made during the first policy meeting chaired by Kevin Warsh, was widely expected by the market. However, the Fed also suggested that an interest rate increase could be considered before the end of 2026.

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The market registered a generalized retreat during the session, as hopes for a decrease in rates (of interest) in 2026 faded.

In response to the Fed's announcement, the New York Stock Exchange experienced a sharp decline. The Nasdaq composite fell by 1.34%, the S&P 500 index dropped 1.21%, and the Dow Jones Industrial Average decreased by 0.97%. Analysts at Briefing.com noted that market hopes for an interest rate reduction in 2026 had faded, contributing to the broad market retreat.

The central bank updated its economic projections, now anticipating annual inflation to reach 3.6% by year-end, an upward revision from the previous 2.7% forecast. Projected GDP growth was slightly lowered to 2.2% from the 2.4% estimated in March. Fed policymakers acknowledged that economic activity is expanding at a solid pace despite significant uncertainty, partly attributed to the conflict in the Middle East. They noted that inflation remains elevated relative to their 2% target, influenced by supply shocks in sectors like energy.

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It only hurts the country and is very unusual.

President Donald Trump commented on the Fed's forecast, calling it "hard to believe" and stating that it "only hurts the country." He described the situation as "very unusual" but deferred to the judgment of Fed Chair Kevin Warsh, whom Trump appointed. Warsh, in his first press conference as chair, pledged that the Fed "will ensure price stability," acknowledging that persistently high prices burden Americans. He also announced the formation of five working groups to review the institution's operations, including its communication strategies and asset management.

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This committee will ensure price stability.