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European stocks surge to highest since Jan. 2022 as Fed signals rate cuts; SNB keeps rates unchanged; ECB and Bank of England to come​

Elliot Smith
Holly Ellyatt
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European markets bounced on Thursday as investors reacted positively to the U.S. Federal Reserve's signal that interest rate cuts will take place next year.

The pan-European Stoxx 600 index was up 1.7% by late morning to hit its highest point since Jan. 2022. Mining stocks jumped 4.2% to lead gains, as almost all sectors and major bourses traded in positive territory. Insurance stocks bucked the positive trend to fall 0.5%.

The Federal Open Market Committee kept interest rates unchanged in a range between 5.25% and 5.5%, in line with Wall Street's expectations. Market sentiment was buoyed after policymakers penciled in at least three rate cuts next year.

 

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https://www.cnbc.com/2023/12/13/fed-interest-rate-decision-december-2023.html


Federal Reserve on Wednesday held its key interest rate steady for the third straight time and set the table for multiple cuts to come in 2024 and beyond.

With the inflation rate easing and the economy holding in, policymakers on the Federal Open Market Committee voted unanimously to keep the benchmark overnight borrowing rate in a targeted range between 5.25%-5.5%.

 

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Along with the decision to stay on hold, committee members penciled in at least three rate cuts in 2024, assuming quarter percentage point increments.

That’s less than market pricing of four, but more aggressive than what officials had previously indicated.

Markets had widely anticipated the decision to stay put, which could end a cycle that has seen 11 hikes, pushing the fed funds rate to its highest level in more than 22 years. There was uncertainty, though, about how ambitious the FOMC might be regarding policy easing.

Following the release of the decision, the Dow Jones Industrial Average jumped more than 400 points, surpassing 37,000 for the first time.

 

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Markets, though, followed up the meeting and Chair Jerome Powell’s press conference by pricing in an even more aggressive rate-cut path, anticipating 1.5 percentage points in reductions next year, double the FOMC’s indicated pace.

In a possible nod that hikes are over, the statement said that the committee would take multiple factors into account for “any” more policy tightening, a word that had not appeared previously.