U.S. stocks benchmarks added to gains, as Federal Reserve, as expected didn’t take any action for this meeting, keeping benchmark rates at a range between 0% and 0.25%, but laid the groundwork for a rate increase as early as March.
That said, there was no commitment to a move at the central bank’s next meeting in mid-March. With consumer inflation now at a 7% annual rate, the Fed wants to get going and move away from its easy-policy stance. The Fed decided today to continue the gradual pace of monthly asset purchases so that they will end in March.
The central bank’s rate-setting Federal Open Market Committee said that it “will soon be appropriate” to lift rates but didn’t offer any clear timing on its plans for shrinking its nearly $9 trillion balance sheet.
“With inflation well above 2% and a strong labor market, the FOMC expects it will soon be appropriate to raise the target range for the federal-funds rate,” the Fed said in its policy statement.
Federal Reserve Chairman Jerome Powell is set to host a news conference to discuss the central bank’s policy later in the session at 2:30 p.m. Eastern Time.
This week thus far stocks have been knocked around by expectations that the FOMC would kick off a series of rate increases to combat building inflationary pressures, removing a level of liquidity and rates near 0% that speculators have enjoyed for years.
The Dow Jones Industrial Average DJIA, +0.63% traded 320 points, or 0.9%, to 34,602.
The S&P 500 index SPX, +1.23% advanced 68 points, or 1.6%, to 4,426.
The Nasdaq Composite Index COMP, +2.05% climbed 368 points, or 2.8%, to reach 13,908.
The 10-year Treasury note rate TMUBMUSD10Y, 1.801% was at around 1.80%, compared with around 1.78% before the policy statement.
Gold futures GCG22, -1.21% GC00, -1.21% tumbled, falling $22.80, or down 1.2%, to settle at $1,829.70 an ounce, after touching a two-month high on Tuesday, but was down 0.2% in electronic trade on Globex after the Fed decision.
Against that backdrop, yields have risen and rate-sensitive segments of the market, such as the tech-heavy Nasdaq Composite Index, have fallen as investors discount cash flows for once-highflying corporations in the face of inflation and rising rates.