Wall Street reached new record highs on Thursday after the US Federal Reserve's announcement of its first interest rate cut in four years. The S&P 500 climbed 1.7% to close at a record high, marking its first such peak since July. The Dow Jones Industrial Average also hit a record, rising by 1.3%, while the Nasdaq Composite surged 2.5%.
The Fed's decision to cut interest rates by 50 basis points from a two-decade high, announced on Wednesday, initially led to a drop in major US indices. However, on Thursday, global markets responded positively, pushing US stock indices to new heights.
The Fed's rate cut comes amid easing inflation in the US, with expectations for an additional 50 basis point reduction by the end of the year. Fed Chair Jerome Powell reassured markets that the rate cut was a "recalibration" of policy rather than a response to an immediate economic downturn. "I don’t see anything in the economy that suggests the likelihood of a downturn is elevated," Powell said.
In London, the FTSE 100 rose by 0.9% after the Bank of England decided to keep interest rates steady. The next significant central bank decision is expected from the Bank of Japan on Friday.
US stock markets have had a remarkable year, with the S&P 500 up over 20% since the start of 2024, the Nasdaq rising by 22%, and the Dow Jones Industrial Average increasing by 11%. The Fed's actions are part of an effort to achieve a "soft landing" for the US economy, aiming to normalize price growth while avoiding a recession.
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