Stocks rose steadily on Wall Street Wednesday after the Federal Reserve said it would accelerate its pullback of economic stimulus and would likely raise interest rates three times next year to tackle rising inflation. The Fed will shrink its monthly bond purchases at twice the pace it previously announced, putting it on pace to end them altogether in March. The S&P 500 rose 75.76 points, or 1.6%, to 4,709.85, just below the record high it set last Friday. The Dow Jones Industrial Average rose 383.25 points, or 1.1%, to 35,927.43. The Nasdaq rose 327.94 points, or 2.2%, to 15,565.58. Nearly 70% of the stocks in the S&P 500 rose, with technology and health care companies accounting for much of the gains.
The central bank plans to shrink its monthly bond purchases at twice the pace it previously announced, likely ending them altogether in March, the AP reports. The bond purchases were intended to hold down long-term rates to aid the economy but are no longer needed with unemployment falling and inflation at a near-40-year high. The accelerated timetable puts the Fed on a path to start raising rates in the first half of next year. "This was a well-telegraphed acceleration of the taper,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. "The Fed has the option, but not obligation to hike three times in 2022. The growth and inflation outlook will likely improve where they can just take it slow."
Fed Chair Jerome Powell said Wednesday that the US economy is growing at a "robust pace" even as it faces risks from the pandemic, and he thinks spending by businesses and consumers will remain strong. But because inflation is likely to persist longer than the Fed had earlier expected, Powell said the central bank needs to address that threat to help the economy sustain its expansion. "We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched,” Powell said , per the AP.
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