Editor’s note: This article was updated to add more detail and context.
The Federal Reserve held its benchmark interest rate steady at 3.75%-4% on Wednesday, in line with market expectations, a month after its first rate hike in three years.
The vote was 10-2. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favor of a quarter-point hike.
The statement said “inflation remains elevated.”
The FOMC added that “the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal.”
Consumer prices rose 3.7% in the year to September, while core prices climbed 0.3% on the month.
Traders now see a 86% chance of a hike at the Dec. 9 meeting, according to CME FedWatch.
Fed Chair Kevin Warsh will speak at 2:30 p.m. ET, likely facing questions on why the Fed held despite inflation running far above target.
How Markets Reacted to the Fed Decision
Treasury yields climbed after the decision.
The two-year yield rose 4 basis points to 4.78%. The 10-year yield moved back above 5%, up 4 basis points to 5.04%, while the 30-year yield gained 3 basis points to 5.34%.
The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) fell 0.6%.
Stocks gave back part of their gains.
The S&P 500 was up 0.1% at 7,728, while the Nasdaq 100 rose 0.2%. The Russell 2000 slipped 0.1%.
Rate-sensitive sectors took the hardest hit.
The SPDR S&P Regional Banking ETF (NYSE:KRE) dropped 1.4%, and the SPDR S&P Homebuilders ETF (NYSE:XHB) fell 1.1%. The Real Estate Select Sector SPDR Fund (NYSE:XLRE) lost 1%, and utilities fell 0.6%.
Chipmakers held firm instead. The VanEck Semiconductor ETF (NASDAQ:SMH) rose 1.3%, and energy gained 0.9%.
Precious metals extended their losses. Gold fell 0.6% to $4,035 an ounce, while the iShares Silver Trust (NYSE:SLV) dropped 1.7%.
Bitcoin (CRYPTO: BTC) slipped 0.1% to $80,688, and the dollar index was flat near 102.35.
Image: Shutterstock
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