US stocks hit records as Federal Reserve confirms plan for 2024 interest rate cuts

Major Wall Street indices surged to fresh records on Wednesday after the Federal Reserve reaffirmed plans for interest rate cuts in the coming months, cheering investors who had feared a retreat.

The US central bank as expected opted to keep interest rates unchanged for a fifth consecutive meeting. The Fed also stayed the course in its forecast for three rate cuts in 2024, despite recent inflation data that topped estimates.

“Inflation is still too high,” Fed Chair Jerome Powell told a news conference.

But despite the recent uptick, Powell said this year’s inflation data “haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward two per cent”.

Keeping the three rate cuts on the outlook allowed the market “to breathe a sigh of relief”, said Briefing.com analyst Patrick O’Hare, adding that investors also welcomed Powell’s characterisation of the economy as relatively strong.

Fed policymakers also updated their economic forecasts, sharply upgrading the US growth outlook for this year to 2.1 per cent, from 1.4 per cent in December

The three major US indices pushed to all-time closing records, with the Nasdaq winning the most at 1.3 per cent.

Meanwhile the dollar retreated against the euro and the pound.

Hong Kong stocks slip as China holds key policy rate, US rate cut bets dashed

Earlier, London and Frankfurt finished little changed. But Paris’ luxury-heavy CAC 40 index fell 0.5 per cent after French giant and Gucci-owner Kering issued a profit warning over weak Chinese demand.

“This is causing concern that other luxury houses could see a similar downturn in demand from this important market,” said Kathleen Brooks, an analyst at XTB.com.

Kering shares closed down 12 per cent in Paris, its worst single-day decline ever.

LVMH fell 1.4 per cent and Hermes was little changed. In London, Burberry shed more than three per cent.

London stocks were largely flat even though UK inflation fell more than expected, fuelling speculation that the Bank of England could start cutting its key rate in June rather than later in the year.

In the euro zone, European Central Bank President Christine Lagarde warned of the risk of acting “too late” on interest rate cuts, reaffirming the likelihood that the first reduction in the bloc’s borrowing costs would come in June.

“We cannot wait until we have all the relevant information,” Lagarde said at a conference in Frankfurt.

But she also declined to pre-commit to an interest rate path once that first cut has been made.