Stock futures opened lower Wednesday evening as investors contemplated the Federal Reserve’s latest monetary policy decision and updated projections, which signaled a quicker path to higher interest rates than previously anticipated. Contracts on the S&P 500, Dow and Nasdaq added to earlier losses.
Each of the three major stock indexes ended Wednesday’s session lower after the Fed’s new projections pointed to two rate hikes by year-end 2023. Federal Open Market Committee members also upgraded their forecasts for economic growth and inflation, affirming market participants’ concerns over sustainably higher prices. While the Fed left rates on hold at the conclusion of this month’s meeting and kept the pace of asset purchases unchanged, market participants are now gearing up for a potentially less accommodative tilt to Fed policy.
“There was a more hawkish tone from the Federal Reserve, mostly coming from the Committee but [Fed Chair Jerome] Powell also offered an upbeat assessment of the economy with small steps toward the exit,” Michelle Meyer, Bank of America U.S. Economist, said in a note Wednesday. “The big surprise came from the dots where the median expectation is now for 2 hikes in 2023 with only 2 dots away from 2022 also showing a hike.”