Hong Kong: Equities rallied in Asia on Thursday after the Federal Reserve ramped up its outlook for the US economy but reiterated its pledge to maintain its ultra-loose market-friendly monetary policies for as long as needed.
It is expected that economic growth will accelerate this year, huge stimulus spending will begin to be implemented, and vaccines will be launched one after another. In recent weeks, investors have become increasingly worried about rising inflation, which may force the central bank to reconsider its dovish stance.
However, the Fed’s decision after the most recent board meeting is music in the eyes of traders.
Policymakers forecast the world’s top economy to expand 6.5 percent this year, two percentage points above its earlier projection, thanks to trillions of dollars in government spending and the expected easing of lockdown measures that will allow people to get back to their daily lives.
And, crucially, they continued to pledge that the record low interest rates that have been a key pillar of the year-long markets rally will not be touched for the foreseeable future.
Bank boss Jerome Powell told a news conference that while the recovery had been faster than expected, “the economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved”.
He said that the Fed “will continue to provide the needed support to the economy as long as it is needed.”
Although some board members are striving to raise interest rates before 2023, investors are encouraged by the forecast that even if inflation soars, borrowing costs may still remain at the level before 2024.