NEW YORK (AP) — Stocks fell after the Federal Reserve announced its latest hike to interest rates, while also saying it may not tighten the screws much more on the economy. The S&P 500 fell 1.6% Wednesday, while Treasury yields fell sharply. The Fed raised its key overnight rate by a quarter of a percentage point, the same size as its last increase, in its campaign to drive down inflation. It also said it may raise rates only one more time as it assesses the fallout from the crisis hitting the banking industry. Banks have been struggling under the weight of much higher rates.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

NEW YORK (AP) — Stocks are mixed Wednesday after the Federal Reserve announced its latest hike to interest rates, while also saying it may not tighten the screws much more on the economy and Wall Street.

The S&P 500 was 0.2% higher in late trading. The Dow Jones Industrial Average was down 35 points, or 0.1%, at 32,525, as of 3:22 p.m. Eastern time, while the Nasdaq composite was 0.5% higher. All three indexes were close to flat before the announcement.

The Fed raised its key overnight rate by a quarter of a percentage point, the same size as its last increase, in its campaign to drive down inflation. The move was exactly what Wall Street was expecting. The bigger question was where the Fed is heading next. There, the Fed gave a hint it may not hike rates much more as it assesses the fallout from the banking industry’s crisis.

Instead of repeating its statement that “ongoing increases will be appropriate,” the Fed made sure to say Wednesday that it now only sees “some additional policy firming may be appropriate.” Chair Jerome Powell emphasized the shift to ”may” from “will.”

The Fed also released the latest set of projections from its policy makers on where rates are heading in upcoming years. The median forecast had the federal funds rate sitting at 5.1% at the end of this year, up only a smidge from where it currently sits, in a range of 4.75% to 5%.

That’s also the same level as seen in December, and it’s counter to worries in the market that it could rise given how stubborn high inflation has remained.

That helped to send yields slumping in the bond market, which has been home to some of the wildest action this month.

The yield on the two-year Treasury, which tends to track expectations for the Fed, tumbled to 4.00% from 4.13% just before the projections were released. It was above 5% earlier this week, and a drop that size for the bond market is a massive one.

The Fed was stuck with a difficult decision as it balanced whether to keep hiking rates to drive down inflation or ease off the increases given the pain it’s already caused for the banking industry, which could drag down the rest of the economy. The second- and third-largest U.S. bank failures in history have both occurred in the last two weeks.

Just a few weeks ago, much of Wall Street was convinced the Fed would pick up the pace on rate hikes given how strong inflation has remained and the tough talk Fed officials were giving about it.

Higher rates can undercut inflation by slowing the economy. But they raise the risk of a recession later on, and they also hurt prices for stocks and other investments. That latter factor was one of the reasons for the collapse of Silicon Valley Bank two weeks ago. Its bond investments fell in price as the Fed jacked up rates over the last year at the fastest pace in decades.

Silicon Valley Bank also suffered from what’s called a bank run, where its customers began pulling money out at the same time in a debilitating cascade. Since then, investors have been hunting for what bank may be next to fall, and regulators around the world have been trying to strengthen confidence in the industry.

A worry is that too much pressure on the banking system, particularly among the smaller and mid-sized banks at the center of investors’ crosshairs, would mean fewer loans made to businesses across the country. That in turn could mean less hiring and less economic activity, raising the risk of a recession that many economists already see as high.

Powell said such a pullback in lending could act almost like a rate hike on its own. And that was one of the reasons the Fed opted to raise by only 0.25 points instead of 0.50 points. He also said that he sees the banking system overall as strong and sound.

Markets around the world have pinballed sharply this month on worries the banking system may be cracking under the pressure of much higher rates. They found some strength recently after U.S. Treasury Secretary Janet Yellen indicated the government may back depositors at more weakened banks if the system is at risk.

That could mean making sure even customers with more than the $250,000 limit insured by the Federal Deposit Insurance Corp. can get all their money. Across the Atlantic, regulators also pushed a deal for one Swiss banking giant to buy its troubled rival.

On Wall Street, some of the biggest excitement was around what are called “meme stocks.”

GameStop shot up 37.8% after it reported a surprise profit for its latest quarter. Analysts were expecting another loss for the struggling video-game retailer.

The stock rocked Wall Street in early 2021 when hordes of smaller-pocketed and novice investors piled into it, sending its price surging and inflicting big losses on hedge funds that had bet on its decline.

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