The Dow Jones Industrial Average closed at another new record high on Wednesday, topping 33,000 points for the first time ever.
Wall Street closed up after a pledge by the Federal Reserve to keep interest rates near zero and take a hands-off approach to inflation to bolster a full economic recovery post-pandemic.
Action on interest rates is not expected until the end of 2023.
The Dow rose 189.42 points to 33,015.37, the S&P 500 gained 11.41 points to 3,974.12, and the tech-focused Nasdaq added 53.64 points to 13,525.20.
Upgrading its economic outlook, the Fed sees growth in US gross domestic product at 6.5 per cent in 202. The last projection by the Fed in December was for growth in 2021 of 4.2 per cent.
It is then expected to cool in subsequent years, to 3.3 per cent in 2022, and 2.2 per cent in 2023.
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Growth of more than six per cent has not been seen in the US since the Reagan presidency.
The Fed’s projection is slightly more conservative than the seven to eight per cent predicted by Goldman Sachs in a note to clients earlier in the week.
Core inflation is expected to run at 2.2 per cent this year, over the stated goal of 2 per cent. A sustained move above that level might lead to the Fed considering a change in policy, but otherwise, it will be allowed to run hot.
Chairman Jerome Powell stressed in comments after the Fed’s two-day meeting that the rosier outlook did not mean it would now remove its support for the economy, with the nation still 9.5 million jobs short of where it was before the emergence of Covid-19.
In a press conference on Wednesday afternoon, Mr Powell said: “We do expect that we’ll begin to make faster progress on both labour markets and inflation as the year goes on because of the progress with the vaccines, because of the fiscal support that we’re getting.”
He added: “We expect that to happen, but we’ll have to see it first.”
“The Fed statement today was more optimistic than some expected, they raised their outlook for both economic growth and the labour market,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York. “The market’s view of the statement is that it was fairly optimistic.”
With reporting from Reuters
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