Global Stock Markets Rise After Fed Announces Interest Rate Cuts Next Year

On Wall Street, the Dow Jones jumped 2.9 percent last week to a record 37,305 points, while the S&P 500 strengthened 2.5 percent to 4,719 points, and the Nasdaq index rose 2.8 percent to 14,813 points.

At the last meeting of the year, Fed leaders left interest rates unchanged on Wednesday in the range of 5.25 to 5.50 percent, as inflationary pressures gradually ease. This was expected, but the market was spurred by the assessment of nearly all Fed leaders that interest rates will be reduced next year, and that will happen in three instances.

Additional support for the market came from Fed Chairman Jerome Powell‘s comment at a press conference that the central bank is unlikely to raise interest rates further.

– Inflation has eased, and this has occurred without a significant rise in unemployment. This is good news – said Powell, adding that the Fed is now very focused on not making a mistake by keeping rates too high for too long.

After the assessments and messages from Fed leaders, the market now estimates that there is 90 percent chance that the central bank will begin to cut rates in May, after more than a year and a half of tightening monetary policy.

– After all, it seems that inflation will fall back to normal levels without a recession. This is what investors hoped for, and now it seems very likely – says Tom Martin, portfolio manager at Globalt Investments.

In addition to the Dow Jones, other indices on Wall Street have risen for the seventh consecutive week, reaching new highs for the year.

ECB Also Left Rates Unchanged

On most European stock exchanges, share prices rose last week after the leaders of the European Central Bank decided to keep interest rates unchanged at their last meeting of the year.

Analysts estimate that the ECB, like the Fed, has completed its cycle of interest rate increases and that rate cuts will follow next year.

The London FTSE index strengthened 0.3 percent to 7,576 points, while the Paris CAC rose 0.9 percent to 7,596 points. The Frankfurt DAX, on the other hand, weakened by 0.1 percent to 16,751 points.

Furthermore, the dollar index, which tracks the value of the U.S. currency against six major world currencies, slipped 1.3 percent last week to 102.59 points, close to its lowest level in four months.

At the same time, the dollar weakened by 1.2 percent against the European currency, bringing the price of the euro to 1.0895 dollars. The dollar exchange rate also fell against the Japanese currency, by 1.9 percent to 142.15 yen.