Stocks closed sharply down on Friday following comments from Federal Reserve Chairman Jerome Powell that the Fed will press forward with raising interest rates amid lingering inflation.
The Dow Jones Industrial Average dropped more than 1,000 points, while the Nasdaq composite dropped almost 500 points. The S&P 500 dropped by more than 140 points.
All three declines meant a more than 3 percent drop. All are still slightly above their levels a month ago, but much of their gains in that time were erased on Friday.
Powell gave a keynote address at the Fed’s annual policy summit in Jackson Hole, Wyo., saying that the central bank would be willing to take “forceful and rapid” steps to address inflation even if it means potentially higher unemployment rates and a recession.
The Bureau of Economic Analysis revealed on Friday that inflation slowed to 6.3 percent in July from exactly a year ago. This figure is down from the 6.8 percent annual inflation rate that was reported in June.
But the Fed’s goal is to get inflation down to 2 percent, and Powell said the drop from last month is “far short” of what the Fed needs to see before it can be confident that inflation is dropping.
The Fed has already raised interest rates from a range of 0 to 0.25 percent in March to 2.25 to 2.5 percent in July. This included two consecutive increases of 0.75 percentage points, the largest monthly increases in almost 30 years.
Higher interest rates can restrain economic growth by making borrowing money more expensive and slowing consumer spending.
Powell said the Fed’s decision on how much to raise interest rates next month will be based on the data it receives.
—Updated at 4:47 p.m.