NEW YORK / RankWire.AI / – Following the Federal Reserve raising interest rates by 25 basis points, U.S. equities ended the day lower on Wednesday. This move pushed the federal funds target range up to 3.75% to 4.00%. The Dow Jones Industrial Average declined by 631.21 points, or 1.21%, closing at 51,461.90. The S&P 500 dropped 34.55 points, or 0.46%, to finish at 7,551.81. Meanwhile, the Nasdaq Composite dipped 3.16 points, ending at 25,978.42.
The unanimous 12-0 vote at its September meeting authorized the rate hike. This marks the first increase since July 2023. Policymakers highlighted ongoing economic growth, citing resilient domestic spending, strong productivity, and vigorous capital investments. They also noted that employment gains matched workforce expansion, with little change in unemployment rates.
Inflation remained a key focus during the September 15-16 gathering. The Federal Reserve emphasized that inflation levels stayed high and reaffirmed its 2% target. This decision came after a period of stability when rates were held steady following previous reductions. Wednesday’s increase signaled a shift in monetary policy for the first time in over three years. As bond yields increased, U.S. stocks declined by the close.
Federal Reserve releases updated economic forecasts
The new projections accompanying the rate decision indicated a median 2026 federal funds rate of 4.1%. This is higher than the 3.8% median forecast from June. Officials also forecast a median rate of 4.1% for 2027 and 3.9% for 2028. These projections reflect individual policymakers’ views on appropriate monetary policy and are not predetermined paths for future Federal Reserve actions.
For 2026, the officials estimated real U.S. GDP growth at 2.3%, up from the June median of 2.2%. The median unemployment rate projection was lowered to 4.1% from 4.3%. They also forecast headline personal consumption expenditures inflation at 3.7% for 2026, with the median core PCE inflation (excluding food and energy) at 3.4%.
Bond yields increase as equities decline
During Wednesday’s trading, Treasury yields rose in tandem with falling major U.S. stock indices. The two-year Treasury yield approached 4.73%, while the 10-year benchmark increased to roughly 5.00%. These higher yields followed the Federal Reserve’s quarter-point hike and the release of its updated economic outlook. The Russell 2000, representing smaller U.S. companies, also dropped about 0.4% to 2,858.81. Overall, declining stocks outnumbered advancing ones across key exchanges.
Despite the downward move on Wednesday, the main indexes maintained a positive trajectory for 2026, closing higher for the year. The S&P 500 gained approximately 10.3%, the Dow increased about 7.1%, and the Nasdaq rose around 11.8%. The session drew renewed market focus on interest rates, inflation, and Treasury yields. Future Federal Reserve decisions will depend on data reviewed at upcoming policy meetings.