NEW YORK (AP) — U.S. stocks slumped Wednesday on speculation the Federal Reserve may hike interest rates this year to keep a lid on inflation. Higher rates can tap the brakes on accelerating prices at cash registers, but they also slow the economy and hurt prices for investments.The S&P 500 dropped 1.2% and erased an earlier, modest gain after the Fed released projections showing that nine of 18 policymakers foresee at least one increase to its main interest rate this year. The Dow Jones Industrial Average went from a gain of 280 points in the morning to a drop of 507 points, or 1%, while the Nasdaq composite sank 1.3%.One important policymaker at the Fed did not give a forecast for where the federal funds rate may end 2026: Chairman Kevin Warsh. In his first press conference as head of the U.S. central bank, Warsh said he’s also considering a revamp of how the Fed communicates with financial markets and U.S. households and businesses.
One of his first moves was to end the inclusion of hints in Fed statements about where interest rates may be heading in the future, something called “forward guidance.”
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Warsh said he wants Wall Street to react to incoming reports about inflation, the job market and other economic data based on how they should affect prices for stocks, bonds and other investments rather than how traders expect the Federal Reserve to react to them.
