U.S. stocks traded mostly higher Wednesday after the Federal Reserve maintained interest rates at 3.75% to 4%, while persistent inflation and stronger economic growth increased expectations of another rate hike in December.
By yourNEWS Media Newsroom
NEW YORK — Wall Street stocks posted modest gains Wednesday after the Federal Reserve left its benchmark interest rate unchanged, as investors assessed the central bank’s stronger economic outlook and growing expectations of another rate increase before the end of the year.
The Dow Jones Industrial Average and S&P 500 edged higher following the Federal Reserve’s afternoon announcement, while the Nasdaq Composite slipped slightly during midafternoon trading.
At approximately 2:56 p.m. Eastern, the Dow was up 0.10%, the S&P 500 had gained 0.05% and the Nasdaq was down 0.13%, according to Reuters market reporting.
The Federal Open Market Committee voted 10-2 to maintain the federal funds rate within its existing range of 3.75% to 4%, matching widespread expectations following September’s quarter-percentage-point increase.
In its Oct. 28 policy statement, the central bank upgraded its assessment of economic conditions, citing resilient domestic spending, strong productivity growth and robust capital investment.
“Economic activity is expanding at a strong pace,” the Fed said, while acknowledging that uncertainty remains elevated partly because of geopolitical developments.
The committee also emphasized that “Inflation remains elevated.”
Federal Reserve Governor Lisa Cook and Cleveland Federal Reserve Bank President Beth Hammack opposed the decision, favoring another quarter-percentage-point increase to address continuing price pressures.
The decision provided little immediate surprise to financial markets, which had overwhelmingly anticipated that policymakers would leave borrowing costs unchanged.
“The Fed didn’t throw any curveballs,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “It was widely expected they’d hold, so no big surprise there.”
Detrick suggested that inflation could prompt policymakers to raise rates at their next scheduled meeting.
“Likely the pressure will be to do one more hike in December, as inflation is still potentially an issue,” he said.
Federal Reserve Chair Kevin Warsh reinforced the central bank’s willingness to respond to economic developments during his post-meeting news conference.
Warsh said policymakers had made clear their readiness to act if conditions required additional measures to restore price stability.
The committee’s statement emphasized the importance of gathering more economic information before determining the next policy adjustment.
“The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal,” the Fed said.
Financial markets increasingly anticipated another rate increase following the announcement.
According to CME Group’s FedWatch tool, traders were pricing in an 87.4% probability of a quarter-percentage-point increase at the December meeting, compared with 78.3% Tuesday.
Those figures represent market-implied expectations rather than a commitment by the Federal Reserve to raise rates.
Investors are awaiting additional economic reports Thursday that could influence the central bank’s next decision.
The Commerce Department is scheduled to release its latest Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, along with preliminary third-quarter gross domestic product figures.
Those reports will provide further evidence about the strength of consumer spending, economic growth and underlying inflation.
The Fed’s latest assessment suggests that economic activity remains resilient despite higher borrowing costs and geopolitical uncertainty.
Strong business investment and productivity growth have supported expansion, while employment gains have broadly kept pace with labor force growth.
However, persistent inflation continues to complicate the central bank’s efforts to maintain price stability.
The benchmark federal funds rate influences borrowing costs throughout the economy, including credit cards, business loans, automobile financing and other forms of consumer credit.
Although mortgage rates are not directly set by the Fed, expectations about future monetary policy also affect longer-term borrowing costs.
The central bank’s decision came during an active corporate earnings season.
According to LSEG data cited by Reuters, approximately 200 companies in the S&P 500 had released quarterly results, with 84% reporting earnings above analysts’ consensus estimates.
Investors were also awaiting results from Microsoft and Alphabet, scheduled after Wednesday’s closing bell.
Strong corporate earnings have provided support for stock valuations, although investors remain sensitive to changes in interest rate expectations because higher borrowing costs can affect business investment and future profits.
The Federal Reserve’s next scheduled policy meeting is Dec. 8-9, when officials will reassess inflation, employment and broader financial conditions.
For now, Wednesday’s decision leaves monetary policy unchanged while keeping another increase under consideration.
The market’s muted response reflected the absence of an unexpected policy announcement, with attention shifting toward upcoming inflation figures and whether economic conditions justify additional tightening in December.
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