Wall Street sinks as US Fed steps up inflation fight

Smaller company stocks also slumped. The Russell 2000 index fell 25.35 points, or 1.4 per cent, to 1,762.16.

The broader market has been lurching between gains and losses throughout the week ahead of the latest update on interest rates from the Fed.

More than 90 per cent of the stocks in the S&P 500 fell, with retailers, banks and technology companies among the heaviest weights on the benchmark index. Amazon dropped 3 per cent, Bank of America shed 3 per cent and Apple fell 2 per cent.

The Fed has been raising rates aggressively to try and tame high prices on everything from food to clothing.

During his press conference, Powell stressed his resolve to lift rates high enough to slow the economy and drive inflation back toward the central bank’s 2per cent goal. Powell said the Fed has just started to get to that level with this most recent increase.

The central bank’s latest rate hike lifted its benchmark rate, which affects many consumer and business loans, to a range of 3 per cent to 3.25 per cent, the highest level in 14 years, and up from zero at the start of the year.

“The Fed is pivoting, but not in the direction that many hoped for,” said Willie Delwiche, investment strategist at All Star Charts. “Not only are they indicating that rates will be higher for longer but they expect to persist even as the economy slows more dramatically remains weaker longer than they were expecting as recently as June.”

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The Fed’s goal is to slow economic growth and cool inflation, but Wall Street is worried that it could hit the brakes too hard on an already slowing economy and cause a recession. Those concerns have been reinforced by reports showing that inflation remains stubbornly high and statements from Fed officials they will keep raising rates until they are sure inflation is coming under control.

Central banks worldwide are also dealing with inflation. The Bank of Japan began a two-day monetary policy meeting Wednesday, although analysts expect the central bank to stick to its easy monetary policy. Rate decisions from Norway, Switzerland and the Bank of England are next. Sweden surprised economists this week with a full-point hike.

Global tensions remain high as Russia’s invasion of Ukraine continues. Russian-controlled regions of eastern and southern Ukraine have announced plans to start voting this week to become part of Russia. The war has killed thousands of people, driven up food prices worldwide and caused energy costs to soar.

Gasoline prices, which helped fuel inflation for months, have been generally falling. But, the average price for a gallon of gas went up for the first time in more than three months, rising to $3.681 from $3.674, according to motor club AAA.

Cruise line operators slipped as Hurricane Fiona continued to batter the Caribbean. Carnival slid 6.8per cent.

With Yuri Kageyama and Matt Ott.

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