Wall Street rallies despite rate hike
And finally, stocks have closed sharply higher in New York despite the US central bank making its biggest interest rate rise in over 20 years.
The benchmark S&P 500 index has ended the day 3% higher, its best day since May 2020.
The rally came after Fed chair Jerome Powell said central bank officials are not “actively” considering a rate hike of three-quarters of a percentage point at coming monetary policy meetings.
Powell calmed nerves by telling reporters:
“A 75 basis point increase is not something that the committee is actively considering.”
The Fed is clearly on track to raise borrowing costs several times more, as it tries to get inflation under control (although rate hikes won’t fix some factors, such as China’s lockdowns and the Ukraine war).
But Powell also tried to reassure investors, saying there was a good chance of a soft or softish landing....
Good chance of "soft or softish" landing, says Powell.#Fed steps up inflation fight with string of double policy rate rises
— Johan Löf (@Johan_E_Lof) May 4, 2022
• 50 bp rate rise & start to QT
• Tighten "expeditiously" ahead, but not quickening further
• Inflation risks worrying!
🔗 https://t.co/jO1RebJqDH pic.twitter.com/Bt4NepYjw4
Stocks have jumped in New York, after Jerome Powell told the press conference that the Fed is not “actively considering” a 75-basis point hike.
That has calmed concerns that the Fed could announce a really sharp rise in borrowing costs at its next meeting mid-June.
The Dow is up over 2%, or 700 points, at 33,828 points.
Stocks really popped higher when Powell said the FOMC was NOT considering .75 basis point hikes at future meetings. https://t.co/2tTvKYJB1r pic.twitter.com/UamJi66L5j
— Ben White (@morningmoneyben) May 4, 2022
Intraday expectations (fed fund futures) for the June rate hike, Powell's comment brought that back down to 50bps quite quickly. pic.twitter.com/acWW7GxDfn
— Michael McDonough (@M_McDonough) May 4, 2022
When the most dovish thing the Fed Chair says is that the FOMC isn't actively considering 75 basis point hikes, you live in interesting times.
— Michael McDonough (@M_McDonough) May 4, 2022
