Investors searched for hints Wednesday on whether the Federal Reserve might begin cutting interest rates next year. The central bank didn’t disappoint.
Stocks hovered near the flatline throughout the trading session until Fed members unanimously voted to hold rates steady and signaled that they could begin easing monetary policy next year. While Chair Jerome Powell left the possibility of additional hikes on the table, markets paid little attention.
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The US Federal Reserve has given Wall Street something it was hoping for, and stocks have responded in kind.
Global equity markets have surged following the Fed’s news that it will keep interest rates near zero. The announcement marks the conclusion of its two-day policy meeting, where it announced that it would keep the policy rate unchanged at the current range of 0.00-0.25 percent and continue to buy at least $120 billion of Treasury and mortgage-backed securities each month.
The Dow Jones Industrial Average closed up 2.8%, the S&P 500 gained 2.7% and the Nasdaq Composite rose 3.4%, all setting new all-time high records.
The US central bank further acknowledged that it would retain its “extraordinary” accommodative stance to keep inflation on target. It also said it would continue to use all available policy tools to support the US economy.
The Fed’s news was welcomed by Wall Street. With the current low-interest rate environment, investors have been feeling the impact on bond yields and stock market values. Stocks have been lifted in response to the Fed’s decision, as more stimulus is injected into the economy.
In addition to the Fed’s move, positive vaccine news also buoyed investor sentiment. New data from the US Centers for Disease Control and Prevention showed that the number of Americans getting screened for COVID-19 has been steadily rising. These positive developments likely contributed to the market rally.
Overall, the Fed’s decision has earned a positive response from Wall Street. Investors have responded with record setting stock increases, giving the market something to be hopeful for in the short-term.
