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Fed Chair Powell gives stocks the all-clear to keep moving higher

Key Points
  • The Fed upgraded its view on the economy and said inflation could rise, but temporarily.
  • But Fed Chairman Jerome Powell said the central bank was not close to discussing winding down its bond buying, which would be a first step toward ultimately raising interest rates.
  • Since the tapering of the bond program is expected to take as much as a year, market pros said Powell signaled that rates will stay low for a long time, and the environment will be positive for stocks and other risk assets.
Federal Reserve Chair Jerome Powell speaks during a Senate Banking Committee hearing on Capitol Hill, Washington, December 1, 2020.
Al Drago | Pool | Reuters

Fed Chairman Jerome Powell signaled that the central bank is not looking to tighten policy any time soon, a bullish sign for stocks and other risk assets.

Powell spoke following the Fed's two-day meeting Wednesday and surprised bond market pros with his comments that the central bank is not close to discussing paring back its $120 billion a month bond-buying program.

Some strategists have expected the Fed to discuss tapering purchases as soon as its June meeting.

In its statement, the Fed acknowledged that the economy is improving, and it expects a spurt of higher inflation, albeit temporary. Powell told the press briefing that there was still a large amount of slack in the labor market, despite improvement.

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