The Federal Reserve has maintained its current approach to monetary policy, maintaining ultra-low interest rates and asset-buying programs designed to add economic stimulus until the unemployment rate falls to 6.5 per cent.
In response, stocks added to earlier gains, with the S&P 500 now up 12 points, or 0.8 per cent, at 1,560.61 - just five points away from its record closing high of 2007. The Dow Jones industrial average was back up to near its intraday highs of this morning - the highest ever. It was last up 84 points, or 0.6 per cent, at 14,540.
After commenting in January that economic activity had “paused” in recent month, the Fed sounded more upbeat this time. In its March policy statement, it said: “Information...suggests a return to moderate economic growth following a pause late last year.”
However, it continues to see “downside risks to the economic outlook.” It also sees inflation running below its longer-run objective.
On employment, which has shown signs of progress with declining weekly jobless claims and rising monthly payrolls, the Fed tried out new wording. It now says, “Labour market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated.” That’s a change from the previous statement, which said that “employment has continued to expand at a moderate pace.”
In other words, the Fed delivered no surprises and the markets picked up steam several minutes after the Fed statement was released. Fed chief Ben Bernanke is now holding a news conference.