US stocks surge on Fed chair comments that rate hikes could slow

Fed chairman Jerome Powell said the US central bank could ease its stance on interest rate hikes “as soon as” December. PHOTO: AFP

NEW YORK - Wall Street stocks soared on Wednesday after Federal Reserve chairman Jerome Powell signalled a moderation from the central bank’s aggressive posture to counter inflation.

The Dow Jones Industrial Average finished up 2.2 per cent at 34,589.77, an increase of nearly 740 points.

The broad-based S&P 500 gained 3.1 per cent to 4,080.11, while the tech-rich Nasdaq Composite Index jumped 4.4 pe rcent to 11,468.00.

Mr Powell, appearing at the Brookings Institution in Washington, said the Fed could ease its stance on interest rate hikes “as soon as” December when policymakers are next scheduled to meet.

He added that the full effects of the bank’s rapid tightening are yet to be felt.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he said.

But Mr Powell warned that policy will likely still have to remain tight “for some time” to restore price stability.

The Fed has raised the benchmark lending rate by 0.75 percentage points four consecutive times in recent months, out of six times this year, in an aggressive effort to rein in prices.

Mr Powell’s latest remarks add to expectations that the Fed will undertake a smaller 0.50 percentage point increase in December.

Major indices had been near flat prior to his speech, but rallied once the remarks were reported.

Stocks have risen over the last month, in part on expectations that the Fed would soon pivot on monetary policy. Mr Powell’s appearance was viewed as a potential risk to equities if he adopted a more hawkish tone.

Earlier on Wednesday, government data showed the United States economy grew at 2.9 per cent in the third quarter, annualized, better than initially estimated.

But payroll firm ADP said private employers added just 127,000 jobs in November, much fewer than expected and well below the level in October.

The Fed’s “beige book” of economic activity said that uncertainty and “increased pessimism” clouded the country’s outlook amid high prices and rising interest rates. AFP

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