Wall Street's main indexes have see-sawed before slumping in the final 30 minutes of trading to close lower as investors absorbed the Federal Reserve's latest rate hike and future policy commentary.
At the end of its two-day meeting, the Fed lifted its policy rate by 75 basis points for the third time to a 3.00-3.25 per cent range.
Most market participants had expected such an increase, with only a 21 per cent chance of a 100 bps rate hike seen prior to the announcement.
However, policymakers also signalled more large increases to come in new projections showing its policy rate rising to 4.40 per cent by the end of this year before topping out at 4.60 per cent in 2023.
This is up from projections in June of 3.4 per cent and 3.8 per cent respectively.
Rate cuts are not foreseen until 2024, the central bank added, dashing any outstanding investor hopes that the Fed foresaw getting inflation under control in the near term.
With the mix of the expected and the slightly-unexpected, respectively in the form of the size of the rate hike and the path for future increases, markets swung back and forth in the aftermath of the announcement as investors digested the news.
Declines accelerated in the final 30 minutes of trading though.
"Markets were already braced for some hawkishness, based on inflation reports and recent governor comments," said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
"But it's always interesting to see how the market reacts to the messaging. Hawkishness was to be expected but while some in the market take comfort from that, others take the position to sell."
The S&P 500 lost 66.25 points, or 1.72 per cent, to end at 3,789.68 points, while the Nasdaq Composite lost 205.16 points, or 1.80 per cent, to 11,219.89 and the Dow Jones Industrial Average fell 524.24 points, or 1.71 per cent, to 30,181.99.