Stocks rose on Wall Street shortly after The Federal Reserve will announce that it expects to raise interest rates three times next year, in his attempt to stop the growing inflation.
Following its two-day monetary policy meeting, the Fed noted that your inflation target was met, and his announcement about the end of bond purchases paved the way for three quarter-point interest rate hikes by the end of 2022.
The central bank plans reduce your monthly bond purchases at twice the rate you previously announced, and it is likely to end them in March.
The bond purchases were intended to keep long-term interest rates low to help the economy, But they are no longer necessary, as unemployment is declining and inflation is at a nearly 40-year high. The fast-paced schedule puts the Fed on the path of starting to raise rates in the first half of next year.
The top three US stock indices reversed previous losses and rose. Wall Street expanded those gains when the Fed chairman He was optimistic about the US economic recovery and willing to raise rates when necessary to control inflation.
According to preliminary data, the S&P 500 gained 75.48 points, or 1.63%, to 4,708.37 units, while the Nasdaq Composite advanced 330.94 points, or 2.17%, to 15,568.58 units. The Dow Jones Industrial Average rose 390.19 points, or 1.10%, to 35,934.37 points.
“This is a well-planned acceleration”said Brian Jacobsen, investment strategist at Allspring Global Investments. “The Fed has the option, but not the obligation, to go up three times in 2022. The outlook for growth and inflation is likely to improve and they can take it easy. “
“What the markets are saying is that as the Fed is increasing its ‘taper’, they may feel that inflation is under control.”Said Tom Martin, Senior Portfolio Manager at Globalt Investments. “They have done what was expected. It will increase the credibility of the Fed and that will be – overall – from neutral to positive for the markets”.
The central bank was expected to announce a quicker withdrawal of its stimulus measures as inflationary pressures mount. However, concerns about the impact of the Fed’s measures, coupled with the latest variant of the coronavirus, have sparked a hectic trading as the market nears the close of 2021.
Inflation and rising interest rates have become one of Wall Street’s main concerns in recent months. Data from Tuesday showed producer prices rose more than expected in the 12 months through November, posting their biggest increase since 2010.
“Hedge funds positioned themselves for the worst, in terms of the worst for equities, upon reaching the Fed statement”Said Michael James, Managing Director of Equities Operations at Wedbush Securities. “Today, I think, it is a function of selling the expectation and buying the news “.
(With information from AP and Reuters)
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Wall Street reacted positively to the Fed announcement and all indices finished with gains