Markets Soar As Fed Signals No Rate Increases Until Next Year

The Federal Open Market Committee left its benchmarked interest rates at near zero on Wednesday though it indicated it intended to reduce monthly asset bond purchases soon.

According to the FOMC’s post meeting statement, “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may be warranted.”

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Though the Fed did not give a definite indication of when it would reduce its monthly bond buying asset purchase program, though the committee did say in its statement that it could start its so-called “taper” before its next meeting on Nov 2-3.

In addition, the Fed indicated that rate hikes could be coming next year amid its higher-than-expectated estimates for inflation.

Though it cut its economic outlook for this year, the Committee predicts that GDP will gain just 5.9% this year, compared with its June forecast for 7% growth. Core inflation (minus food and energy) for the year is expected to increase 3.7% (up from 3% in June.) Nonetheless, the Committee anticipates that inflation pressures will dissipate in 2022, with officials predicting a 2.3% increase in 2022 and between 2.1-2.2% in 2023.

Including food and energy, inflation will likely be at 4.2% according to the Fed’s predictions.

The dow soared on the news, gaining 38O points as the S&P jumper 33 points.


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