Stocks soar on Fed chair’s dovish signal on interest rates

The chair of the Federal Reserve took a softer line on interest rates yesterday, after being slammed by President Donald Trump over his hawkish policies.

Jerome Powell hinted he may end interest rate hikes, saying rates are now “just below” the level which would not impact a healthy economy.

Buoyed by the statement, Wall Street investors sent stocks soaring. The Dow Jones Industrial Average had its best day in almost eight months, closing up 572 points, or 2.3 per cent, at 25,320, while the S&P 500 rose 2.3 per cent to 2,743.

The speech signalled a move away from past statements.

Last month Powell said the Fed was a long way from neutral interest rates, sending stocks down.

His shift follows criticism from US President Donald Trump who nominated him for the role last year.

On Tuesday the president told the Washington Post blames the Fed for recent declines in the stock market and General Motors’ plans to close two plants in the US.

“So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing,” he said.

Powell “gave the market, and presumably President Trump, exactly what he wanted, which was an admission that the previously proposed path of future rate hikes was probably too aggressive,” Oliver Pursche, chief market strategist at Bruderman Asset Management in New York, told Reuters.