US stocks had their best day since May 2020 after Federal Reserve Chair Jerome Powell reassured investors that no more than a 50 basis point rate hike would be considered to curb inflation.
The Dow Jones Industrial Average of major US stocks rose 938 points to above 34,000, up more than 2.8 percent.
The S&P 500 index rose almost 3 percent to a peak of 4,300 points from a previous close of 4,175. The tech-heavy Nasdaq rose more than 400 points for a gain of nearly 3.2 percent.
The surge in stock values comes as investors braced themselves for the latest Federal Reserve rate hike figures amid 40 years of high inflation.
The guideline Federal Open Markets Committee voted unanimously to raise its key interest rate by half a percentage point, or 50 basis points, the largest rate hike in more than 20 years.
“The committee believes there should be more hikes of 50 basis points on the table at the next few meetings,” Powell said.
Although the rate hike is the highest since 2000, investors seemed satisfied that it was not higher and that record inflation did not prompt even more drastic action from the Fed.
“A 75 basis point hike is not actively contemplated by the committee,” Powell said.
The Fed is now performing delicate maneuvers to cool an overheated economy without pushing it into recession.
While the Fed is ostensibly an apolitical organization in charge of monetary policy, its decisions have major ramifications for both the Legislature and the Biden administration, whose approval ratings have plummeted as the prices of essential goods and services plummeted have shot up.
The annual consumer price index rose 8.5 percent last month. The energy index rose 32 percent last year and the food index rose 8.8 percent, the largest 12-month rise since May 1981, according to the Labor Department.
Economists agree that supply chain disruptions and high demand due to the pandemic are at the root of inflation and that there is little fiscal action governments can take to bring it down.
Whether the Fed’s rate hikes will be strong enough to quell inflation remains to be seen.
Today’s top stock gainers included IT firm Super Micro Chip Inc., up 31 percent, chemical maker Livent, up 30 percent, and speech recognition company SoundHound AI, up 15 percent, according to statistics from Yahoo Finance.