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June 16 (Reuters) - The three main Wall Street indexes all
fell on Wednesday, as U.S. Federal Reserve officials unnerved
investors with indications that they are projecting interest
rate hikes for 2023, which was earlier than investors had
New projections saw a majority of 11 of 18 U.S. central bank
officials pencil in at least two quarter-percentage-point rate
increases for 2023. At the same time, officials pledged to keep
policy supportive for now to encourage an ongoing jobs recovery.
The Fed cited an improved economic outlook, with overall
economic growth expected to hit 7% this year.
With inflation rising faster than expected and the economy
bouncing back quickly, the market had been looking for clues of
when the Fed may alter the policies put into place last year to
combat the economic fallout from the pandemic, including a
massive bond-buying program.
The Fed reiterated its promise to await "substantial further
progress" before beginning to shift to policies tuned to a fully
open economy. It also held its benchmark short-term interest
rate near zero and said it will continue to buy $120 billion in
bonds each month to fuel the economic recovery.
However, investors interrepted the Fed's comments on rates
as more hawkish than before.
"At first blush, the dot plot which projected two hikes by
2023 was more hawkish than expected, and markets reacted as
such," said Daniel Ahn, chief U.S. economist at BNP Paribas.
Unofficially, the Dow Jones Industrial Average fell
264.41 points, or 0.77%, to 34,034.92, the S&P 500 lost
22.83 points, or 0.54%, to 4,223.76 and the Nasdaq Composite
dropped 33.17 points, or 0.24%, to 14,039.68.
(Reporting by Shashank Nayar and Medha Singh in Bengaluru and
David French in New York; Editing by David Gregorio, Marguerita
Choy and Matthew Lewis)