The stock market soared on Wednesday after Federal Reserve Chairman Jerome Powell said that inflation is coming down and he believes the U.S. will avoid a recession this year.
“We can now say I think for the first time that the disinflationary process has started,” he told reporters, adding that he expects U.S. economic growth to be positive this year, even if it falls to a “subdued pace.”
Fed officials are usually careful to never make big, explicit recession predictions, but past press conferences from Chair Powell often included language meant to cap investor enthusiasm and temper expectations—in one famous example, he warned the Fed was ready to “bring some pain” to households and businesses. But this time was different.
Although the Fed raised interest rates by 25 basis points on Wednesday, marking the eighth rate hike in under a year, BMO Wealth Management’s chief investment strategist Yung-Yu Ma, said that the Fed chair’s statements show that “peak hawkishness” is behind us and “the ingredients for a soft landing are falling into place.”
“Chairman Powell showed the last of his cards and indicated that he believes in a path to getting inflation down to 2% without a significant economic decline or significant increase in unemployment,” Ma told Fortune.
And Charlie Ripley, senior investment strategist for Allianz Investment Management, argued that Powell’s comments are evidence that the end of interest rate hikes are “on the horizon.”
“Slowing the pace of rate hikes is a clear sign that the Fed is getting comfortable with the idea that the prescribed policy for the economy is finally starting to work,” he told Fortune.
The S&P 500 ended Wednesday up over 1% after Powell’s speech, with the tech-heavy Nasdaq rising 2%. The Euro also soared against the U.S. dollar, in a sign that investors viewed Powell’s comments as dovish.
David Keller, chief market strategist at Stockcharts.com, a…
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