dashed Wall Street’s hopes that it may soon ease up on rate hikes in its effort to tame inflation.
The Dow Jones industrial average was down 954 points, or 2.9%, at 32,338, as of 3:45 p.m. Eastern time, and the Nasdaq composite was 3.8% lower. Powell acknowledged the increases will hurt U.S. households and businesses, in perhaps an unspoken nod to the potential for a recession. But he also said the pain would be far greater if inflation were allowed to fester and that “we must keep at it until the job is done.”Federal Reserve Chair Jerome H. Powell says more large interest rate hikes are likely in coming months to combat inflation.
Expectations had built through the week that Powell would try to bat down recent talk about a “pivot” by the Fed. Such speculation had helped stocks surge through the summer. Some investors were even saying the Fed could cut interest rates later in 2023, as pressures on the economy mount and the nation’s high inflation hopefully recedes.
Perhaps giving some hope to investors, some analysts said Powell seemed to indicate expectations for future inflation aren’t taking off. If that were to happen, it could cause a self-perpetuating cycle that worsens inflation.The government on Thursday updated its estimate of the U.S. economy’s performance in the April-June quarter and confirmed what it had reported last month: That the economy shrank for two straight quarters.
Other data showed that incomes for Americans rose less last month than expected, while consumer spending growth slowed.
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