A 33,000-plus close for the Dow Jones wasn’t enough to inject life into UK markets on Thursday, as they await the latest update from the Bank of England.
The Federal Reserve managed to walk a tricky monetary policy tightrope on Wednesday night. While outlining a new set of forecasts, including the expectation of a 6.5% rise in GDP this year compared to the initial 4.2% estimates, Jerome Powell stated that ‘no one should be complacent’ about the US recovery.
Going onto the say the Fed will ‘provide the economy with the support that it needs for as long as it takes’, the crucial detail came in the central bank’s comments on inflation.
Powell described any rise above the 2% target as ‘transitory’, and that such an increase would not meet the standard required for a shift in monetary policy.
In other words, an increase in interest rates is still off the table until at least 2024, even if 4 members of the FOMC would seek a hike in 2022, and 7 in 2023.
The Dow reacted accordingly, closing nearly 190 points high to stick its foot across 33,000 for the first time in its history.
With the EU regulator set to announce its decision on the safety of the AstraZeneca (NASDAQ:AZN) vaccine, and automakers up in the aftermath of the Fed decision, the DAX easily outstripped its peers. Climbing 1%, the German index crossed 14,740 for the first time. The CAC, by contrast, added 0.1%, leaving it at a 13-month peak.
Once again the black sheep of the Western markets, the FTSE fell 0.2% in anticipation of the Bank of England’s Thursday get-together. Like the Fed, Andrew Bailey and the MPC will be walking a tightrope, needing to celebrate the vaccine-led economic recovery in the UK, reassure about the impact of rising inflation on interest rates, and soothe concerns that the central bank will be turning off the taps any time soon.
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