The disappointing data means traders are bracing for the Federal Reserve to ultimately raise rates even higher than expected to combat inflation.
NEW YORK — Stocks tumbled to their worst day in more than two years Tuesday, knocking the Dow Jones Industrial Average down more than 1,250 points, following Wall Street’s humbling realization that inflation is not slowing as much as hoped.
“Right now, it’s not the journey that’s a worry so much as the destination,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “If the Fed wants to hike and hold, the big question is at what level.” The thinking was that such a slowdown would let the Fed downshift the size of its rate hikes through the end of this year and then potentially hold steady through early 2023.“This piece of data just hammered home that the Fed isn’t going to have the data to do anything differently than continue on their rate-raising path for longer,” said Tom Martin, senior portfolio manager with Globalt Investments. “It just increases the chance of an actual recession.
The Fed has already raised its benchmark interest rate four times this year, with the last two increases by three-quarters of a percentage point. The federal funds rate is currently in a range of 2.25% to 2.50%.
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