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U.S. stocks sank Thursday as investors weighed the potential economic costs of the Federal Reserve’s ongoing fight with inflation.

The S&P 500 fell by 3.25% to 3,666.77, its lowest level since Dec. 2020. It also erased gains after rising 1.5% on Wednesday. The Nasdaq Composite plunged by more than 4%, bringing the index down by more than 30% for the year-to-date. The Dow sank by 741 points, or 2.4%, to close below 30,000 for the first time since January 2021.

  • SPY-3.31%
  • ^IXIC-4.08%
  • ^GSPC-3.25%
  • AAPL-3.97%
  • +3

Suze Orman: Inflation is ‘here to stay for quite a while’

Inflation is “here to stay for quite a while,” Orman told Yahoo Finance’s editor-in-chief, Andy Serwer, on Monday in a wide-ranging interview for his “Influencers” series. To mask soaring inflation, Orman suggests that companies will “shrink their packaging,” so even if consumers pay the same price for goods, they are effectively getting less in value.

“So you’re paying the same price, but you’re getting less in terms of what you’re really paying for. Do you really think when this goes away, Andy, that they’re going to make their boxes bigger again? I don’t think so,” Orman says.

The Federal Open Market Committee’s (FOMC) Summary of Economic Projections (SEP) on Thursday showed the committee itself now sees a less rosy economy ahead as its continues to hike interest rates. The FOMC now anticipates the unemployment rate will come in at 3.7% by the end of this year (versus the 3.5% rate seen in March), and that real gross domestic product will rise just 1.7% (versus the 2.8% increase seen previously). The Fed also raised its forecast for the rate of core inflation at year-end and its expectation for where the Fed funds rate would end 2022.

The Summary of Economic Projections (SEP) and Chair Powell’s presser highlighted a Committee that sees an increasingly narrow path to a soft landing, while still maintaining that as a baseline,” Matthew Luzzetti, chief U.S. economist at Deutsche Bank, wrote in a note. “The statement removed the reference to maintaining a strong labor market as inflation is brought under control and the SEP anticipates that the unemployment rate will eventually rise by about half a percentage point. We continue to anticipate that the Fed will have to move more aggressively than signaled at [Wednesday’s] meeting and that this tightening will trigger a recession in 2023 that leads to a more material rise in the unemployment rate.”

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