The US markets closed lower on Wednesday, as the Federal Reserve acknowledged rising prices and said it now expects inflation to run near its 2% target over the medium term, in its most recent policy statement. The Federal Reserve held interest rates steady and expressed confidence that a recent rise in inflation to near the US central bank's target would be sustained, leaving it on track to raise borrowing costs in June. The upgrading of the Fed's inflation outlook represented a milestone after roughly six years of price gains falling short of its 2 percent goal, even as key aspects of the economy saw a healthy recovery from the 2007-2009 recession. The Fed's rate-setting committee also downplayed a recent slowdown in economic and job growth, saying activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months. The Fed raised rates in March and currently forecasts another two increases this year, although an increasing number of policymakers see three as possible. Investors overwhelmingly expect a rate hike at the June 12-13 policy meeting. The Fed's confidence in the economic outlook was also highlighted by its assertion that business fixed investment had continued to grow strongly. It added that risks to the outlook appear roughly balanced, removing a prior reference to near-term risks. Fed Chairman Jerome Powell has maintained that the central bank will pursue a middle-of-the-road approach to monetary policy, continuing to gradually lift rates in the face of a robust economy that had yet to spark a jump in inflation.
On the economy front, private-sector employment remained strong in April, as employers added 204,000 jobs, Automatic Data Processing Inc. reported. March's gain was cut to show 228,000 growth instead of a previously estimated 241,000. This is the sixth month in a row of job growth above 200,000. Details of ADP's report showed that small firms added 62,000 jobs in April, medium-sized businesses added 88,000 and large companies added 54,000.
The Dow Jones Industrial Average lost 174.07 points or 0.72 percent to 23,924.98, the Nasdaq dropped 29.807 points or 0.42 percent to 7,100.90, and the S&P 500 was down by 19.13 points or 0.72 percent to 2,635.67.