Federal Reserve Chair Jay Powell has lifted expectations for a rate cut after telling his usual post-meeting media briefing that a rate cut was “on the table” at the central bank’s meeting next month.
His remarks came after the Fed left its key rate steady at 5.25% to 5.5%, citing “some further progress” toward its 2% inflation goal.
The only provision was that more encouraging inflation data — such as next week’s July Consumer Price Index and the end-of-month data for last month in the Fed’s favored PCE data — was needed.
The comments propelled stocks to their highs of the day, while gold and oil prices also rose strongly.
The comments helped the S&P 500 jump 1.58% to close at 5,522.30, while the Nasdaq popped 2.64% to 17,599.40. It was the best session since February for both indexes. The Dow added 99.46 points, or 0.24%, to end at 40,842.79.
At session highs, the Dow was up 455.30 points, or 1.1%. The S&P 500 and Nasdaq were up as much as 2.1% and 3.2%, respectively, easing towards the close.
At his briefing, Powell seemed to rule out the likelihood of a 50 basis-point rate cut from the central bank.
“I don’t want to be really specific about what we’re going to do, but that’s not something we’re thinking about right now,” he said.
The central bank is keeping a close eye on the labor market and staying vigilant for signs of a potentially sharp downturn, Fed Chair Powell said.
“We’re watching really carefully for that,” he said during Wednesday’s press conference. “We’re aware of that risk, which … I would call it a statistical thing that has happened through history.”
At this point, low unemployment and a low level of layoffs suggest a “normalizing labor market,” the Fed chair noted.
