In the long human struggle to balance prosperity with stability, Federal Reserve Chair Jerome Powell offered markets a measured reassurance on Wednesday: the central bank would raise rates aggressively, but not recklessly. With a half-point hike — the largest in two decades — already delivered, Powell's signal that even larger moves were off the table was enough to send relief rippling through trading floors from Frankfurt to Shanghai. The moment captured something enduring about economic life: that confidence, as much as policy, shapes the world markets inhabit.
Global stocks rally as Fed chair signals pause on aggressive rate hikes
The Fed was still trying to engineer a soft landing while wrestling with persistently high prices.
Mark
So Powell basically said the Fed won't do a three-quarter-point hike, and that sent stocks up everywhere except Wall Street futures. Why would futures go down if the news was good?
Mimi
Because futures traders might be pricing in something different than the spot market. Or they're hedging. The overseas markets had been closed when Powell spoke, so Thursday morning was their first chance to react. Wall Street had already had a day to digest it.
Luke
Right, but we should be careful here. The source says futures were lower, but it doesn't explain why. We're inferring the reason. What we know for certain is that Powell said no three-quarter-point hike, the Fed did raise by half a point Wednesday, and European markets went up. That's solid.
Mark
What about the Hikvision drop? That seems like a separate story.
Mimi
It is. The Financial Times reported the U.S. was considering adding them to a restricted list for security reasons. That's not about Fed policy at all—it's geopolitical.
Luke
And it's important to note: that's what the FT reported. We don't have confirmation from U.S. officials directly in this piece. It's one source's reporting.
Mark
So investors are still worried about recession, even with Powell's reassurance?
Mimi
Absolutely. The source says investors worry whether the Fed can extinguish inflation without pushing the economy into a downturn. Powell's comments eased the fear of *extreme* rate hikes, but the underlying problem—high inflation—is still there.
Luke
And the Fed is also starting to reduce its bond holdings, which is another tightening measure. So even if rate hikes slow down, the overall monetary squeeze is still happening.
Mark
Is there any sense of whether Powell's approach will actually work?
Mimi
Not in this reporting. We know what Powell said and how markets reacted. Whether it succeeds is still ahead of us.
Luke
That's the right place to leave it. The story is what happened Thursday, not a prediction about what comes next.
Der Puls
- Inflation had been outrunning the Fed for months, and investors feared the central bank might be forced into increasingly drastic rate hikes that could choke off growth entirely.
- Powell's Wednesday statement — that a three-quarter-point hike was not being actively considered — broke the tension, triggering the S&P 500's largest single-day gain in two years and sending European markets surging by as much as 1.8 percent.
- Asian markets responded unevenly, with Shanghai and Sydney posting modest gains while Hong Kong slipped, and Chinese surveillance firm Hikvision plunging its daily limit of 10 percent on reports of potential U.S. restrictions.
- Wall Street futures pulled back Thursday, down as much as 0.8 percent, suggesting that Wednesday's euphoria was giving way to the harder question: can the Fed actually tame inflation without triggering a recession?
- The Fed also announced a gradual unwinding of its massive bond holdings — a deliberate, measured signal that the institution was tightening carefully rather than in alarm.
In the long human struggle to balance prosperity with stability, Federal Reserve Chair Jerome Powell offered markets a measured reassurance on Wednesday: the central bank would raise rates aggressively, but not recklessly. With a half-point hike — the largest in two decades — already delivered, Powell's signal that even larger moves were off the table was enough to send relief rippling through trading floors from Frankfurt to Shanghai. The moment captured something enduring about economic life: that confidence, as much as policy, shapes the world markets inhabit.
Jerome Powell stepped to the microphone Wednesday with the words markets had been waiting for: the Federal Reserve was not planning to raise interest rates by three-quarters of a percentage point. The bank had just delivered a half-point hike — double its usual move and the largest in two decades — but Powell's assurance that even bigger jumps were off the table was enough to shift the mood on trading floors around the world.
European markets opened Thursday with visible relief. London's FTSE climbed 1.2 percent, Frankfurt's DAX surged 1.6 percent, and Paris added 1.8 percent. Analysts like Invesco's David Chao noted that investors had feared the Fed might be cornered into an ever-more-aggressive tightening cycle, and Powell's measured tone had eased that fear. Asia's response was more uneven — Shanghai and Sydney gained modestly, while Hong Kong finished lower, and Chinese surveillance company Hikvision fell its daily limit of 10 percent after reports emerged that U.S. officials were weighing adding it to a restricted entities list.
Wall Street told a more cautious story. Futures on the S&P 500 fell 0.8 percent Thursday morning, a day after the index had surged 3 percent — its best single session in two years. The pullback hinted that the initial relief was giving way to a more sober reckoning: whether the Fed could actually bring inflation to heel without tipping the economy into recession.
Powell had raised the benchmark rate to a range of 0.75 to 1 percent, its highest since before the pandemic. But what moved markets most was what he chose not to do — he declined to signal panic, and announced instead that the Fed would gradually reduce its vast holdings of Treasury debt and mortgage-backed securities. Commodity and currency markets shifted modestly in response, with crude oil edging lower and the dollar strengthening against the yen.
The open question — whether deliberate tightening can extinguish inflation without derailing growth — remained unanswered, hanging over every trading desk as the week wore on.
Jerome Powell stepped to the microphone Wednesday with a message the markets had been waiting to hear: the Federal Reserve would not be hiking interest rates by three-quarters of a percentage point. The central bank had just raised its benchmark rate by half a point—double what it normally does—but Powell made clear that larger jumps were not on the table. By Thursday morning, that reassurance had rippled across trading floors from London to Shanghai.
European bourses opened the day with visible relief. London's FTSE 100 climbed 1.2 percent to 7,583.72. Frankfurt's DAX jumped 1.6 percent to 14,196.71. Paris added 1.8 percent. The pattern was unmistakable: investors had feared the Fed might be forced into ever-larger rate increases to combat inflation, and Powell's words had eased that anxiety. David Chao, an analyst at Invesco, framed it plainly: the Fed was still trying to engineer a soft landing while wrestling with persistently high prices.
Asia's response was more mixed. Shanghai's Composite Index gained 0.7 percent to 3,067.76, and Sydney's S&P-ASX 200 advanced 0.8 percent to 7,364.70. Hong Kong, however, finished lower at 20,793.40, down 0.4 percent despite spending most of the session in positive territory. One notable casualty was Hikvision Digital Technology, a Chinese maker of video surveillance equipment, which fell by its daily limit of 10 percent after the Financial Times reported that U.S. officials were considering adding the company to a restricted entities list for security reasons.
Wall Street told a different story. Futures on the S&P 500 were down 0.8 percent and Dow futures had fallen 0.5 percent by early trading Thursday. This came a day after the S&P 500 itself had surged 3 percent on Wednesday—its largest single-day gain in two years—and the Nasdaq had climbed 3.2 percent. The Dow had jumped 2.8 percent. The futures decline suggested some caution was creeping back in, even as overseas markets celebrated Powell's signal.
What Powell had actually done was raise the Fed's key interest rate to a range of 0.75 to 1 percent, the highest level since the pandemic struck two years earlier. The half-point increase was the biggest move in two decades. But his comment that the central bank was "not actively considering" a three-quarter-point hike at the June meeting was what mattered most to investors. The fear had been that inflation, which had caught the Fed flat-footed last year, might force the institution into an unusually aggressive tightening cycle.
Underlying the market's relief was a deeper anxiety: whether the Fed could actually extinguish inflation without tipping the economy into recession. Powell's measured tone suggested confidence in a narrower path forward. The Fed also announced it would begin reducing its holdings of Treasury debt and mortgage-backed securities—bonds it had been buying for years to inject money into the financial system and keep long-term rates low. That unwinding would happen gradually, another signal of deliberation rather than panic.
Commodity markets reflected the day's cautious mood. Benchmark U.S. crude oil fell 2 cents to $107.79 per barrel, a modest pullback after jumping $5.40 the previous day. Brent crude, the international benchmark, advanced 22 cents to $110.36 per barrel in London, though it had surged $5.17 the day before. Currency markets shifted as well: the dollar climbed to 129.72 Japanese yen from 128.87 yen, while the euro weakened to $1.0599 from $1.0613.
The message from Powell had been carefully calibrated. He was not saying the Fed would stop raising rates. He was saying it would not panic. For markets that had been bracing for a more severe tightening, that distinction mattered enormously. Whether it would prove enough to keep inflation in check without derailing growth remained the open question hanging over every trading desk.
Bemerkenswerte Zitate
The Fed continues to try and orchestrate a soft landing while tackling high levels of inflation.— David Chao, Invesco
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