The Dow Jones Industrial Average fell more than 500 points Wednesday — erasing early gains after new Federal Reserve Chair Kevin Warsh held his first policy meeting.
The broader S&P 500 also dipped 1.2 percent in the worst showing for a new chair on “Fed day” with the losses mounting as Warsh spoke to reporters after the meeting, CNBC reported.
The tech-heavy Nasdaq fell even more and was down 1.4 percent.
The declines came after the Fed kept its key interest rate unchanged and nearly half of its policy makers said they could support a rate hike later this year, according to The Associated Press.
“He is absolutely telling you that he plans on delivering on price stability,” DoubleLine Capital CEO Jeffrey Gundlach said of Warsh on CNBC. “That means… we’re not going to have such easy money policy as everybody thought maybe Chairman Warsh would do back in the first quarter of this year, when everyone was counting on rate cuts.”
In quarterly projections released after the meeting, nine of the other 18 members of the Feds’ rate-setting committee signaled they supported raising the rate, with six supporting two quarter-point increases, AP said.
The officials also dropped language that suggested their next move would be to cut the key rate, suggesting heightened inflation concerns and going against President Donald Trump’s desire for lower borrowing costs.
During his news conference, Warsh underscored the Fed’s determination to reduce inflation to the central bank’s target of 2 percent, suggesting he might support higher interest rates, AP said.
Last month, the annual U.S. inflation rate rose to 4.2 percent, up from 3.8 percent in April and marking its highest level in more than three years.
“We’ve missed (on inflation) for five years and we’re going to fix that,” Warsh said. “When we deliver on our price stability objectives, which we will, the American people will feel as though the hardships that they’ve been living through … are in the rear view mirror.”
Source: independent.co.uk