On Wednesday, the Federal Reserve followed through with its anticipated interest rate increase, raising short-term rates by 0.50% to tame inflation. The central bank suggested a further increase in interest rates this year, also detailing the unwinding of its nearly $9 trillion balance sheet. The U.S. stock market edged higher after the Fed announced that a 75 basis points increase in rates is not being considered. The Dow climbed 2.8%, the S&P 500 surged 3%, while the Nasdaq Composite climbed 3.2%.
However, the economy is still grappling with sky-high inflation and the highest single rate hike since May 2000. The stock market's volatility is evident, with the CBOE Volatility Index (^VIX) up some 40% over the past month. Furthermore, Morgan Stanley (MS) predicted the S&P 500 to fall sharply, expecting a more than 16% fall from last Friday’s close in the worst-case scenario.
