Federal Reserve Chair Jerome Powell is finally giving Wall Street what it wants.
US markets soared Wednesday afternoon after the Fed said it will be “patient” with future rate hikes and hinted at more flexibility in unwinding its $4 trillion balance sheet.
“The case for raising rates has weakened somewhat,” Powell told reporters Wednesday at the conclusion of the Federal Open Market Committee’s first two-day meeting of 2019.
A separate statement from the Fed Wednesday said it is open to changing the size of the balance sheet if economic conditions warranted “more accommodative monetary policy” than just lowering the federal funds rate.
The Dow Jones industrial average popped as much as 529.66 points in afternoon trades as Powell noted that “cross-currents” such as slowing global growth, financial conditions, and trade war worries have forced the Fed to be more patient with its rate-hiking path.
The blue-chip index ultimately closed up 434.90 points, or 1.8 percent, at 25,014.86. It’s the first time the Dow has closed above 25,000 since Dec. 4, when it fell nearly 800 points on trade war worries.
Meanwhile, the broader S&P 500 and tech-weighted Nasdaq were up 1.6 percent and 2.2 percent, respectively.
But while the market liked Powell’s dovish stance, the Fed chairman warned of headwinds lurking in the economy, noting that the partial government shutdown will have impact on first-quarter GDP numbers — and adding that the impact should be corrected in the second quarter as workers receive backpay.
He also said that ongoing negotiations between the US and its trading partners may weigh on businesses more than the tariffs themselves.
“Uncertainty is not the friend of business,” Powell said.
Powell, who was hand-picked by President Trump for the Fed’s top spot, recently attracted scorn from the president for the Fed’s rate-hiking path in 2018.
When asked Wednesday if Trump’s criticisms affected Fed policy, Powell reiterated the Fed’s independence and its duty to serve the American people.
“We’re always going to do what we think is the right thing. We’re never going to take political considerations into account,” he said.
“We’re human. We make mistakes, but we’re not going to make mistakes of character or integrity,” he added.
