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Dow Drops 407 Points After Fed Rate Hike

By Markets Desk · 2026-09-16 · 1 min read
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Illustration: Tradingbird

The Dow Jones Industrial Average fell 407 points as the Federal Reserve raised its benchmark interest rate by 25 basis points.

The Dow Jones Industrial Average fell 407 points on Wednesday. This represents a decline of 0.8 percent in afternoon trading. The move followed the Federal Reserve's decision to raise borrowing costs. This is the first rate increase since July 2023.

The Federal Open Market Committee voted unanimously to hike rates. The target range for the federal funds rate now stands at 3.75% to 4.0%. Fed Chair Kevin Warsh cited persistent inflation as the primary reason. He stated that inflation remains too high and has been so for too long.

Market reaction to the decision

Bank and financial stocks faced the sharpest declines. The S&P 500 index lost 0.4 percent during the session. The Nasdaq Composite remained largely unchanged. Traders had priced in this move well in advance of the announcement.

Data from the CME FedWatch tool showed high expectations. Traders assigned better than 90 percent probability to a quarter-point hike. This figure stood in contrast to the 33.1 percent probability recorded a month earlier. The market adjusted its positions based on these forward-looking metrics.

Inflation forecasts and energy prices

The Fed revised its inflation projections upward. Headline PCE inflation is now forecast at 3.7 percent for the year. Core PCE inflation is projected at 3.4 percent. Both figures are up 0.1 percentage point from June estimates. The 2 percent target is not expected to be reached until 2029.

Energy costs continue to influence the inflation picture. U.S. diesel prices topped six dollars per gallon on Friday. Crude oil remains above 100 dollars a barrel. Brent crude slipped about 3 percent to near 105 dollars. West Texas Intermediate settled at roughly 102 dollars per barrel. GN auto markets/bonds: interest rates noted that 16 of 18 FOMC participants project at least one more hike this year.

Based on reporting by qz.com, compiled by the Tradingbird desk.

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