Interest rate decision pushes Dow Jones Index into the red

The signal from the US Federal Reserve for a turnaround in interest rates earlier than previously expected has weighed on Wall Street and has meanwhile pushed the Dow Jones Index below the 34,000 mark. In late trading, however, the indices recovered from their daily lows, triggered by optimistic statements by Fed chairman Jerome Powell about the economic recovery in the USA. Feds have signaled that interest rates will rise by the end of 2023, earlier than they expected in March, as the economy quickly recovers from the effects of the pandemic and inflation rises. The median of the projection showed that an increase from close to zero to 0.60 percent is expected by the end of 2023. In March, the central bankers expected to keep the key interest rate constant until 2023. As expected, the key rate was confirmed at 0.00 to 0.25 percent. In addition, the bond purchase program is to be continued until "substantial further progress" has been made in the recovery. A possible reduction in the purchase program was discussed, so Powell. In his press conference, Powell said the purchase program would depend on the development of economic data. The Fed will send a signal to reduce purchases well in advance. "There was some lower-than-expected data, such as retail sales. This has eased concerns that the Fed might cut bond purchases faster than expected," said Shaniel Ramjee, fund manager at Pictet Asset Management. The Fed has also increased the interest rate on excess reserves (IOER) of banks by 5 basis points to 0.15 percent. In addition, the reverse repo rate also rose by 5 points to 0.05 percent. For the Dow Jones index it fell by 0.8 percent to 34,034 points, after a daily low of 33,917 points. The S&P 500 fell 0.5 percent to 4,224 points, the Nasdaq composite lost 0.2 percent to 14,040 points.