The announcement of the Federal Reserve’s decisions brought a complete change of scenery on the Wall Street board, with the key indicators “erasing” their initial losses, reacting strongly upwards and finally closing with strong gains.
The US Federal Reserve announced today that it is accelerating the end of its $ 120 billion emergency asset purchase program, which began last year to support the US economy in the midst of a pandemic, which is scheduled to be completed in March. 2022, instead of the June that was originally scheduled.
The faster end of the program paves the way for the federal bank to move more drastically to deal with high inflation, which – as stressed by Fed Chairman Jerome Powell – will continue to move above the 2% target set by the Fed and for a period of 2022, with its de-escalation expected towards the end of next year.
It is noted that the Fed forecasts that inflation will be around 2.6% next year, which is higher than the 2.2% estimate in September.
In this context, Federal Bank officials “see” even three interest rate increases, by 25 basis points each time, until the end of next year, from the current near zero level of 0% -0.25% where the reference rate is Specifically, Fed officials predict that the benchmark interest rate will increase to 0.90% by the end of 2022, with increases continuing in 2023, raising the interest rate to 1.6% and then to 2.1%. 2024, in order to curb inflation and return close to the 2% target set by the Federal Bank.
“Economic developments and changes in the outlook for the economy justify this monetary policy development, which will continue to provide adequate support to the economy,” said Jerome Powell, explaining the Fed’s decision, adding, however, that there is still uncertainty about the course of the economy due to the Omicron mutation.
The Fed also estimates that economic growth next year will reach 4%, ie the economy will run faster than the 3.8% forecast in September, while unemployment will fall to 3.5%.
Returning to the board, the change in scenery brought about by the announcement of the Fed’s decisions is attributed to the fact that it eliminated one of the factors of uncertainty that “burdened” the investment mood in the previous period. interest rates.
After all, the market had already discounted the acceleration of tapering, while forecasting at least two interest rate hikes next year.
Indicators – Statistics
Thus, on the board, the key indicators “erased” the gains that were initially recorded in anticipation of the announcements and closed with significant gains, marking its best performance on an Fed announcement day in almost two years, according to Dow Jones Market data. Data.
In particular, the Dow Jones industrial average added 383 points and closed 1.08% higher at 35,927.43 points, while the broader S&P 500 closed a breath from its all-time high, rising 1.64% to 4,710.19 points. The technology Nasdaq gained 2.15%, closing at 15,565.60 points.
Of the 30 stocks that make up the Dow Jones industrial average, 23 closed with gains and only seven ended with a negative sign. The biggest gains were recorded by Cisco Systems (+ 3.74%), followed by UnitedHealth (+ 3.15%) and Apple (+ 2.85%), while the biggest losses were recorded by Nike (-0.94% ), JPMorgan (-0.85%) and Chevron (-0.64%).
At the end of the day, data released today on retail sales failed to confirm analysts’ estimates in a worrying indication that consumers may restrict their purchases amid the inflation rally.
In particular, the total value of retail sales increased by 0.3% in the previous month, after an increase of 1.8% in October, according to the upward revised measurement of the US Department of Commerce. It is noted that the average estimates of analysts in a Bloomberg poll spoke of an increase in sales by 0.8%.
More encouraging were the New York Fed data on manufacturing activity in the New York area.
In particular, the Empire State Manufacturing Index rose to 31.9 points in December from 30.9 points last month, disproving analysts’ forecasts that it would fall to 25 points in a Wall Street Journal poll.
.
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
