Equities gain on the week but investors reassess interest rate outlook after unexpected labour market acceleration
US stocks closed at their highest level since last summer and government bonds swung higher on Wednesday after the Federal Reserve announced a further slowdown in the pace of interest rate rises. The US central bank lifted its benchmark interest rate 0.25 percentage points to a range of 4.5 per cent to 4.75 per cent. The widely expected move in the federal funds rate was less than previous increases of 0.5 or 0.75 percentage points undertaken at recent meetings. Wall Street’s benchmark S&P 500 index, which had slipped earlier in the day, rebounded after Fed chair Jay Powell spoke to reporters and closed 1.1 per cent higher for the day.
US stocks have rallied this year as the Federal Reserve has slowed its pace of interest rate increases and inflation has moderated. Investors expect the central bank to raise interest rates by a quarter percentage point, which would leave the policy rate in a range of 4.5-4.75 per cent. Such a rise would mark a return to a more normal tempo of rate increases after the Fed last year delivered four consecutive 0.75 percentage point increases before decelerating to a 0.5 percentage point rise in December.