Interest rates are likely to be cut in the US sooner rather than later after Jerome Powell, chairman of the Fed, said a slowing jobs market “may warrant adjusting our policy stance”.
Mr Powell, whose term expires next year, has come under sustained attack from President Trump, who has demanded immediate interest rate cuts to support the economy and labour market.
The chairman’s comments will not only please the White House, they also sent global stock markets higher and boosted the pound against the dollar.
Traders bought US stocks and government bonds, sending the S&P 500 index to an intra-day record high, with jump of 1.5%. The Dow Jones industrial average rose 1.89% to a record close.
The FTSE 100 closed up 12.20 points, or 0.1%t, at 9,321.40, and the FTSE 250, which more closely reflects the state of the domestic economy, rallied 1.2 per cent. European stocks on the Stock 600 gained 0.5%.
Samuel Fuller, director at Financial Markets Online, commented: “For a while this was blue touchpaper territory. After months of equivocation and intense pressure from President Trump, America’s most senior central banker has finally signalled his willingness to cut US interest rates.
“His speech lacked one key detail – when America’s first interest rate cut of 2025 might actually come.
“The markets have been quick to conclude that the first rate cut will come in September, and hopes that it will spur growth have sent equities soaring into the green.
“What is not yet clear is whether the rate cut, whenever it comes, will be a ‘one and done’ or the first of several. But for now the S&P 500 is on a roll and a new record high for the year beckons.”
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