Stock markets reacted with rapid growth to the Fed’s plans to slow down the pace of rate hikes
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US stocks rose sharply yesterday after speeches Fed Chairman Jerome Powell. He made it clear that his department would slow down the rate of increase in the base discount rate.
“The time to slow down the pace of the rate increase may come quite soon, for example, already during the December meeting,” Mr. Powell said. These words were perceived by the market as the Fed’s intention to move away from the recent practice of raising the rate by 0.75% at once and this time go for a more moderate increase – by 0.5% – in December. Investors reacted very positively to the speech of the head of the Fed: the Dow Jones index jumped by more than 700 points, adding 2.2%. The S&P 500 rose 3.1% and the NASDAQ rose 4.4%.
Analysts believe that the slowdown in the Fed’s rate hike may indicate, if not a stabilization of the situation in the economy, then at least a milder recession. “Today’s speech gives more hope for the possibility of a softer landing”— informed Hank Smith, head of strategic analysis at Haverford Trust, The Wall Street Journal, “From a market perspective, we have a chance for a soft landing, as opposed to a hard landing, i.e. a regular recession.”
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