Wall Street took a hit Wednesday as stocks closed lower, while dollar rallied. This came after Federal Reserve upped its inflation forecast and flagged an interest rate hike by year's end.
During press conference, new Fed Chairman Kevin Warsh said central bank would keep interest rates steady. But he plans to review Fed's monetary policy protocols for possible updates. Warsh, stepping in after Trump criticized former chair Jerome Powell for not cutting rates,now faces rising prices.
April inflation hit a three-year peak,partly due to Trump's clash with Iran pushing energy costs up. Fed raised year-end PCE inflation expectations from 2.7% to 3.6%. Warsh stressed Fed's commitment to "deliver price stability," a message that echoed through markets.
Market analysts saw shift on interest rates. Art Hogan from B. Riley Wealth Management called Fed's projections "more hawkish" than expected. Inflation took center stage, overshadowing Fed's dual mandate of full employment. Angelo Kourkafas of Edward Jones noted current focus on inflation means employment isn't pressing. He said,"The bar for rate hikes,thought to be very high,isn't so high now."
Futures markets now show over 60% of traders expect rate hikes at Fed's September meeting, up from less than 30% before announcement.
As dollar rose against euro and others,yields on 10-year US Treasuries climbed. Oil prices ticked up as markets reacted to potential US-Iran peace accord, possibly reopening Strait of Hormuz.
US government released agreement text,with Tehran to dilute enriched uranium under UN watch. Officials called it "a big win." But Iran insists nuclear talks only after this deal finalizes.
Questions linger on Strait of Hormuz. Analysts like David Morrison from Trade Nation say investors want clarity on shipping and fees for safe passage . International Energy Agency reported crude stocks among OECD nations at their lowest since 1990, as governments tapped reserves to ease Middle East conflict impact…
