- S&P 500 rose 0.42% after the Fed's policy announcement
- Nasdaq gained 0.61%, while Dow Jones remained near flat
- Fed raised benchmark rates by 25 basis points as expected
Wall Street gave a thumbs up to the Federal Reserve's long-awaited policy move, with the S&P 500 edging higher following the afternoon announcement. The benchmark index rose 0.42% to 7,617.96, while the tech-heavy Nasdaq Composite climbed 0.61% to 26,138.96. The Dow Jones Industrial Average, however, hovered near the flatline.
The central bank's decision to raise benchmark lending rates by 25 basis points came as no surprise to equity investors. The move was heavily priced into the market and aligned perfectly with the CME FedWatch tool, which had shown a 92.9% probability of a quarter-point hike heading into the meeting.
In the bond market, the 10-year Treasury yield retreated from its recent surge. The benchmark yield slipped by 5 basis points to 4.947% in the minutes immediately following the release of the policy statement.
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The positive equity reaction reflects market relief that the Kevin Warsh-led Federal Open Market Committee sees the broader economy on stable footing. Policymakers noted that economic activity is expanding at a solid pace, supported by domestic spending that has remained resilient despite prevailing macro uncertainty.
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However, the central bank also signaled that borrowing costs will remain restrictive. The FOMC reiterated its commitment to delivering price stability, noting that inflation remains elevated. Further tightening is already on the table, with 16 officials projecting at least one more rate hike before the end of 2026.
Fresh projections show the median policy rate resting at 4.1% through both 2026 and 2027. Officials expect a prolonged battle against stubborn prices, forecasting core PCE inflation to remain at 3.4% this year and slowly moderate before finally returning to the central bank's 2% target in 2029.
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