NEW YORK / RankWire.AI / – U.S. stocks ended lower Wednesday after the Federal Reserve raised its benchmark interest rate by 25 basis points. The decision lifted the federal funds target range to 3.75% to 4.00%. The Dow Jones Industrial Average dropped 631.21 points, or 1.21%, to close at 51,461.90. The S&P 500 declined 34.55 points, or 0.46%, to 7,551.81. The Nasdaq Composite finished 3.16 points lower at 25,978.42.
The Federal Reserve approved the increase in a unanimous 12-0 vote at its September policy meeting. The move represented the central bank’s first interest rate increase since July 2023. Officials said economic activity continued to expand at a solid pace. Domestic spending remained resilient, while productivity growth and capital investment stayed strong. The central bank also reported that job gains kept pace with growth in the labor force and that unemployment changed little.
Inflation remained above the Federal Reserve’s 2% goal as policymakers reviewed economic conditions at the September 15-16 meeting. The rate increase followed a period of unchanged borrowing costs after earlier cuts. It also marked a shift from the policy direction that had prevailed for more than three years. U.S. stocks moved lower into the close, while Treasury yields rose across several maturities. Smaller-company shares also declined during the session.
Fed projections show higher 2026 policy rate
Updated economic projections showed a median federal funds rate estimate of 4.1% for the end of 2026. That compared with a 3.8% median estimate in the projections released in June. Policymakers also listed median rate estimates of 4.1% for 2027 and 3.9% for 2028. The projections represent individual officials’ assessments of appropriate policy conditions. They do not establish future interest rate decisions, which the Federal Reserve considers at scheduled meetings.
Officials raised their median forecast for real U.S. gross domestic product growth to 2.3% for 2026. The June projection had put growth at 2.2%. The median unemployment forecast fell to 4.1% from the previous estimate of 4.3%. Policymakers projected headline personal consumption expenditures inflation at 3.7% this year. Their median forecast for core PCE inflation, which excludes food and energy prices, stood at 3.4%.
Treasury yields climb as major indexes retreat
Treasury yields rose as investors absorbed the rate decision and the central bank’s updated economic projections. The two-year Treasury yield moved to about 4.73%, while the benchmark 10-year yield reached roughly 5.00%. The Russell 2000 index of smaller U.S. companies fell about 0.4% to 2,858.81. Declining stocks outnumbered advancing issues across major U.S. exchanges. The moves came as financial markets adjusted to the latest official readings on rates, inflation and growth.
Major U.S. stock indexes still held gains for 2026 despite Wednesday’s decline. The S&P 500 remained about 10.3% higher for the year through the close. The Dow had gained about 7.1%, while the Nasdaq had advanced around 11.8%. The latest session brought renewed focus to U.S. interest rates, inflation data and Treasury yields. The Federal Reserve will continue reviewing incoming economic information at its future scheduled policy meetings.