US Stocks Dip as Fed Minutes Signal More Rate Hikes Ahead

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US Stocks Dip as Fed Minutes Signal More Rate Hikes Ahead.

New York, July 6 (Reuters) – U.S. stocks dipped on Wednesday after the release of minutes from the Federal Open Market Committee’s (FOMC) June meeting, which showed that policymakers are likely to continue raising interest rates in an effort to combat inflation.

The S&P 500 index fell 0.2% to 4,446.82, while the tech-rich Nasdaq Composite Index also declined 0.3% to 13,791.65.

The minutes showed that “most participants” at the June meeting believed that “some further modest tightening” of monetary policy would be appropriate. This suggests that the Fed is likely to raise rates by another 0.5 percentage point at its next meeting in July.

The prospect of more rate hikes weighed on stocks, as investors worried that higher rates could slow economic growth.

“The market is starting to price in the possibility of a more aggressive tightening cycle from the Fed,” said Quincy Krosby, chief market strategist at LPL Financial. “That’s not good news for stocks.”

The minutes also showed that policymakers are concerned about the risk of inflation becoming “unanchored,” meaning that people start to expect higher prices in the future. This could lead to a self-fulfilling prophecy, as businesses raise prices in anticipation of higher demand.

The Fed is trying to walk a fine line between raising rates enough to cool inflation without raising them so much that they tip the economy into recession.

“The Fed is in a difficult position,” said Krosby. “They need to raise rates to combat inflation, but they don’t want to raise them so much that they cause a recession.”

The market is likely to remain volatile in the coming weeks as investors assess the implications of the Fed’s monetary policy stance.

US stocks dip as Fed minutes suggest more rate hikes ahead

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