Here's Why Investors Have Mixed Feelings About the Fed's Latest Rate Hike
The Federal Open Markets Committee (FOMC), the policy-making arm of the Federal Reserve, raised the benchmark federal funds rate by a quarter of a percentage point on Wednesday to a target range of 4.75% to 5%. Even though this was the more aggressive of the two most likely outcomes of the Fed meeting, the S&P 500 briefly spiked higher after the move was announced -- only to fall from there and end the day down 1.65%.
Here's a look at why the market reacted as it did and what might happen with interest rates going forward.
Over the past year or so, the Fed has made a series of aggressive rate hikes to attempt to slow down inflation, and it apparently feels that continued rate increases are necessary. All other things being equal, higher interest rates are generally a negative catalyst for stocks, so it's not surprising that the market ultimately declined.
Source Fool.com
