NEW YORK / RankWire.AI / – U.S. stocks closed lower Wednesday after the Federal Reserve raised interest rates by 25 basis points. The increase lifted the federal funds target range to 3.75% to 4.00%. The Dow Jones Industrial Average fell 631.21 points, or 1.21%, to 51,461.90. The S&P 500 lost 34.55 points, or 0.46%, to 7,551.81. The Nasdaq Composite slipped 3.16 points to finish at 25,978.42.
The Federal Reserve approved the rate increase in a unanimous 12-0 vote at its September meeting. The move marked the central bank’s first interest rate increase since July 2023. Policymakers said economic activity continued to expand at a solid pace. They also cited resilient domestic spending, strong productivity growth and robust capital investment. The central bank said job gains had kept pace with the workforce while unemployment had changed little.
Inflation remained a central focus of the September 15-16 meeting. The Federal Reserve said inflation remained elevated and maintained its 2% inflation goal. The decision followed a period in which policymakers had kept rates unchanged after earlier reductions. Wednesday’s increase changed the direction of monetary policy for the first time in more than three years. U.S. equities moved lower by the close as bond yields also rose.
Federal Reserve updates economic projections
New projections released with the decision showed a median 2026 federal funds rate estimate of 4.1%. The June projection had placed the year-end median at 3.8%. Policymakers also projected a median rate of 4.1% for 2027 and 3.9% for 2028. The projections reflect individual officials’ assessments of appropriate monetary policy. They do not represent a predetermined course for future Federal Reserve decisions.
Officials projected real U.S. gross domestic product growth of 2.3% for 2026. That estimate rose from the 2.2% median projection published in June. The median unemployment rate projection fell to 4.1% from 4.3% in the previous forecast. Policymakers projected headline personal consumption expenditures inflation at 3.7% for 2026. Their median estimate for core PCE inflation, which excludes food and energy, stood at 3.4%.
Treasury yields rise as stocks retreat
Treasury yields climbed during Wednesday’s session alongside the decline in major U.S. equity indexes. The two-year Treasury yield reached about 4.73%, while the benchmark 10-year yield moved to roughly 5.00%. Higher yields followed the Federal Reserve’s quarter-point increase and release of its updated economic projections. The Russell 2000 index of smaller U.S. companies also fell about 0.4% to 2,858.81. Declining shares outnumbered advancing stocks across major U.S. exchanges.
Despite Wednesday’s decline, major U.S. indexes remained higher for 2026 through the close. The S&P 500 was up about 10.3% for the year. The Dow had gained about 7.1%, while the Nasdaq had advanced about 11.8%. Wednesday’s session placed renewed attention on interest rates, inflation and Treasury yields across financial markets. The Federal Reserve’s next decisions will depend on information reviewed at future scheduled policy meetings.