Three Federal Reserve officials voted to raise interest rates at the July FOMC meeting, signaling a potential new tightening cycle that historically has triggered stock market corrections. PCE inflation has exceeded the Fed's 2% target for over five years, reaching 4.1% in May before cooling to 3.7% in June, with sticky readings expected through August. Traders are pricing in a quarter-point hike in September 2026 and another in March 2027, according to CME Group's FedWatch tool. In the last three decades, the S&P 500 and Nasdaq Composite have fallen an average of 10% and 12%, respectively, in the three months after the first hike of a tightening cycle.
Fed officials voted to hike rates, signaling a tightening cycle that raises the policy rate.
Expected rate hikes push bond yields up, as the article notes historical corrections after first hikes.
