NEW YORK: Global stocks edged up slightly on Wednesday after the US Federal Reserve ended its pandemic-era bond purchases in March.
The announcement paves the way for three quarter-percentage-point interest rate hikes through the end of 2022, as the Fed exits policies implemented at the start of the global health crisis.
In new economic projections released after the end of the two-day policy meeting, officials predict inflation will run at 2.6% next year, compared to 2.2% projected in September, and the unemployment rate will fall to 3.5%.
The global gauge of MSCI shares rose 0.10% and the pan-European STOXX 600 index rose 0.26% after the Fed’s statement.
At 2:45 p.m. EST/19:45 GMT, the Dow Jones Industrial Average was up 119.82 points, or 0.34%, at 35,664, the S&P 500 was up 17.25 points, or 0.37%, at 4,651.34, and the Nasdaq Composite added 23.45. points, or 0.15%, at 15,261.09.
The US 10-year Treasury yield was 1.4701%, and the 30-year bond yield was 1.8545%.
The prospect of a short-term rate hike supported the US dollar, particularly against the euro and the yen, where monetary policy is expected to lag.
The dollar index rose 0.15%, down 0.11% to $1.1245, along with the euro.
The risk of rising cash rates has been a burden for gold, which offers no fixed returns. Spot gold fell 0.3% to $1,764.91.
Inflation is also an issue elsewhere, with British consumer price inflation rising to 5.1% in November at its highest level in more than 10 years, exceeding all forecasts by economists ahead of the Bank of England rate-setting meeting on Thursday .
Investors quickly raised their bets that the BoE is about to raise rates.
“It’s all up to the Fed, but UK inflation data is an absolute disaster for the Bank of England – for all intents and purposes they should hike rates but the problem is the uncertainty surrounding O’Micron and its surroundings,” said Michael Hewson, chief Market Analyst at CMC Markets.
The European Central Bank meets on Thursday and is expected to dial back another stimulus but pledge abundant support for next year, clinging to its long-held view that dangerously high inflation will automatically will decrease.
The International Energy Agency said oil prices fell after the spread of the Omicron coronavirus pandemic, which would improve global fuel demand. [O/R]
But US crude was up 0.20% at $70.87 a barrel and Brent up 0.24% at $73.88 a barrel.
(Additional reporting by Sujatha Rao and Saikat Chatterjee; Editing by Alexander Smith, Alexandra Hudson, Jane Merriman, Philip Fletcher)
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