Dow sinks 1,100 points after Fed holds off on hike

Stocks fell sharply Wednesday as the Federal Reserve held interest rates steady again despite continued inflation pressure. 

The Dow Jones Industrial Average closed down 1,153.18 points, or 2.19 percent, for its worst decline since April 2025 — when President Trump unveiled his sweeping “Liberation Day” tariffs. 

The S&P 500 dipped by 1.52 percent, falling to 7,316.15 points by the closing bell. The Nasdaq composite dropped by 1.74 percent to 24,442.94 points, after the metric reached an all-time closing high of 27,093.90 in early June. 

In a 9-3 decision earlier Wednesday, the Federal Open Market Committee (FOMC) maintained its baseline interest rate at a range of 3.5 percent to 3.75 percent. It marked the fifth straight time the rate-setting panel has held rates, after the FOMC slashed borrowing costs by a quarter-point at each of its final three meetings of last year. 

While speaking to reporters after the decision, Fed Chair Kevin Warsh noted inflation remains above the central bank’s 2 percent target rate. Annual inflation cooled last month, falling from a three-year high of 4.2 percent in May to 3.5 percent in June, according to the consumer price index, a popular measure of inflation.

“The economy is showing impressive resilience, even with recent shocks,” Warsh said, referring to energy price hikes amid the Iran war. “The trends are positive and reveal solid growth. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

The Fed chair also said his shift away from issuing forward guidance has given markets a “direct” message.

The central bank’s website says forward guidance, which outlines the likely future course of monetary policy, helps individuals and businesses make “decisions about spending and investments.” But since taking over at the Fed, Warsh has strayed away from issuing forward guidance to give markets what he argues is a clearer picture. 

“We’re trying not to interfere with that market signal. That’s part of the reason why we’ve been somewhat spare in our words, why we pulled back from forward guidance. So [markets are] reacting to events, I would say, much more directly over the 42 days since we last met,” Warsh said, noting the FOMC’s last rate decision June 17.

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