US stocks tumble after hawkish Fed minutes signal rate rises

investmentweek.co.uk:

Minutes from the Federal Reserve’s most recent monetary policy meeting revealed an intent to increase interest rates further, which caused US equities stocks to drop in response.

The Fed opted to pause its streak of interest rate hikes and kept rates at 5-5.25% at its June meeting, which sparked a market rally.

But the forward guidance and messaging from the Fed's chair Jerome Powell since has consistently indicated that the central bank was not done increasing rates.

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The minutes provided context for June's pause, with sticky global energy prices and core inflation combined with a tight labour market «underscored the need to raise policy rates further or hold them at sufficiently restrictive levels to bring inflation back to their respective targets and be well positioned in case inflation failed to decline as expected».

The transcript also showed the majority of the open market committee expected it would eventually need to pursue its QT policy again, but the central bank would be tightening at a slower pace going forward.

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«Many also noted that, after rapidly tightening the stance of monetary policy last year, the Committee had slowed the pace of tightening and that a further moderation in the pace of policy firming was appropriate in order to provide additional time to observe the effects of cumulative tightening and assess their implications for policy,» it read.

US equity markets slid on the back of the news, with the Dow, S&P 500 and Nasdaq down 0.4%, 0.2% and 0.2%, respectively, according to MarketWatch data.

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