S&P 500 hits new record after Fed stays policy course

The Federal Reserve slashed its 2014 growth forecast for the US economy after the rough winter but kept policy on hold on Wednesday, showing faith in a modest rebound. Fed Chair Janet Yellen said the economy had picked up after the first quarter’s contraction, but she also downplayed a pickup of inflation as any sign of a need to tighten monetary policy. As expected the Federal Open Market Committee (FOMC) cuts its stimulus programme back by another $10 billion, to $35 billion a month, compared with $85 billion in December before the taper began. The FOMC estimates economic growth this year at 2.1-2.3 per cent, sharply down from the March prediction of 2.8-3.0 per cent, before the depth of the winter setback was known. It also left the benchmark federal funds interest rate at 0-0.25 per cent, where it has been since the end of 2008. US stocks, which were trading slightly lower ahead of the FOMC announcement, liked the news and finished higher. The S&P 500, a broad measure of the US stock markets, jumped 14.99 points (0.77 per cent) to 1,956.98. The Dow Jones Industrial Average gained 98.13 (0.58 per cent) to 16,906.62, while the tech-rich Nasdaq Composite Index advanced 25.60 (0.59 per cent) to 4,362.84. US Treasury bond yields were lower, and the dollar meanwhile fell 0.4 percent to $1.3590 per one euro, according to AFP.