USA stocks surged on Wednesday after the Federal Reserve said it would be patient in lifting borrowing costs further this year, reassuring investors anxious about a slowing economy.
But with just a few key changes to the Fed's post-meeting statement and in scripted comments during his news conference, Powell left no doubt that officials believe the prospects for the U.S. economy weren't as bright and the risk of inflation not a strong as they were on december 19, when the Fed last boosted rates.
Analysts said investors were also reassured by the USA central bank's clarification of its plans to shrink its portfolio of bonds and mortgage-backed securities.
It also said it could alter the pace of its balance sheet reduction "in light of economic and financial developments". Besides invoking the word "patient" to describe the Fed's outlook toward future hikes, Powell has stressed there's no "preset course" for rate increases.
The economic impact of the partial government shutdown will be among topics Powell will face at his news conference, in addition to the global slowdown, the US-China conflict and Britain's struggles to achieve a smooth exit from the European Union.
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"The central bank said on Wednesday that it plans to be 'patient" about future rate hikes. For traders, the Fed's line that it's "prepared to adjust any of the details for completing balance sheet normalisation" confirmed a shift in a policy unwind that's roiled markets. That suggests the FOMC has will set policy with a larger balance sheet than would be the case if it went back to its pre-crisis approach.
The economic outlook, however, has become more clouded as a result of recent volatility in financial markets and signs that growth is slowing overseas, including in China and the euro zone.
Investors liked what they heard. The S&P 500 index was up 41.05 points at 2,681.05, while the Nasdaq composite was up 154.79 points at 7,183.08. Last year, the Fed had predicted that there would be two more rate hikes in 2019. Policy makers will still update economic projections quarterly. The Fed has increased rates in five consecutive quarters and nine times since December 2015.
Job gains have been strong, on average, in recent months, and the unemployment rate has remained low.
"The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes", the statement said.
As the central bank does every January now, the Fed also published a separate statement on its longer-run goals and policy strategy.