By Stephen Culp
NEW YORK (Reuters) – Wall Street surged on Wednesday, building on and then paring earlier gains after the U.S. Federal Reserve released its statement at the conclusion of its two-day policy meeting.
All three indexes were green throughout the session but moved higher after the Federal Open Markets Committee announced it left key interest rates near zero but warned it would soon begin raising the Fed Funds target rate to combat persistent inflation related to the COVID-hobbled supply chain.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the statement said.
FOMC’s statement also said it agreed to reduce the size of its asset holdings, but would not begin to do so until after the rate liftoff.
Fed funds futures have fully priced in a 25 basis-point rate hike for the Fed’s March meeting, and a total of four such hikes in 2022.
“The Fed provided some clarity on the prospect of rate hikes but not all the clarity markets were looking for,” said Russell Price, chief of economics at Ameriprise Financial Services in Troy, Michigan. “There’s still some uncertainty when it comes to the balance sheet roll off. The market’s glad to get a little more clarity given the uncertainty that accompanies transition periods like this.”
“More details will come in the press meeting,” Price added.
Fed Chairman Jerome Powell is expected to speak at a Q&A news conference beginning at 2:30 p.m. EST.
The Dow Jones Industrial Average rose 211.08 points, or 0.62%, to 34,508.81, the S&P 500 gained 53.09 points, or 1.22%, to 4,409.54 and the Nasdaq Composite added 274.68 points, or 2.03%, to 13,813.97.
(Reporting by Stephen Culp in New York; Additional reporting by Sinead Carew in New York, Susan Mathew, Devik Jain and Bansari Mayur Kamdar in Bengaluru; Editing by Matthew Lewis)
