(News Bulletin 247) – American indices ended the Wednesday session very sharply, following the meeting of the American Federal Reserve and the press conference of its president Jerome Powell. Projections from members of the central bank show three rate cuts next year.

Father Powell rather than the whipping father. American indices ended very sharply higher on Wednesday evening, enthusiastic about the outcome of the monetary policy meeting of the American Federal Reserve (Fed).

The Dow Jones Industrial Average broke a record at the close, crossing 37,000 points for the first time, with an increase of 1.4% to 37090.24 points. The S&P 500 rose 1.37% to 4,707.09 points and the Nasdaq Composite advanced 1.38% to 14,733.96 points.

The Fed, as widely anticipated by the market, kept its key rates unchanged and its president, Jerome Powell, was careful not to declare victory in the fight against inflation during his press conference. He also did not rule out the possibility of a further increase in key rates, if economic data justified it, according to Bloomberg.

The central banker nevertheless acknowledged that Fed members had discussed rate cuts.

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Projections that took the market by surprise

Above all, the market was delighted with the dot plots, or the economic and monetary projections of the members of the Fed. According to this document, the central bank members’ median projection for 2024 key rates stands at 4.6%, which implies a total of 75 basis points (0.75%) of rate cuts per year. next (or three cuts of 25 basis points). According to Bloomberg, economists did not expect as much.

“The Federal Reserve, as expected, maintained its current interest rates but indicated a dovish turn which suggests that its further action could involve a series of rate cuts in 2024”, underlines Stephen Innes of Spi Asset Management. The dot plot, which reflects members’ projections, suggests 75 basis points of cuts throughout 2024, catching markets completely off guard when most had interpolated 50 basis points of cuts (at most) and a backlash on the easing of financial conditions,” he adds.

“We continue to believe that with core inflation normalizing much faster than Fed officials are willing to admit, the first rate cut will likely come at next year’s March meeting.” , judge Capital Economics. “We then expect the Fed to reduce rates by 25 basis points at each meeting starting in March, for a cumulative cut of 175 basis points in 2024,” adds the think tank.

Following these announcements, the yield on the 10-year US sovereign bond collapsed, falling to less than 4% (3.964%), its lowest level since the end of July. The dollar fell against the euro, with the euro zone currency currently trading at $1.0902, the highest since August.