Reply #71: Stocks Rise Following Fed Rate Decision

[citizen snips]

NEW YORK (AP) -- Stocks shot higher Wednesday, sending the Dow Jones industrials up by triple digits after the Federal Reserve answered two of Wall Street's major concerns, indicating that the economy remains healthy and that inflation pressures are easing.

The Fed, which issued its economic assessment as it decided to leave short-term interest rates unchanged at 5.25 percent, said recent indicators "suggested somewhat firmer economic growth" and tentative signs of stabilization in the housing market. Investors also appeared pleased by the central bank's comments that readings on core inflation have "improved modestly" in recent months.

Wall Street had expected the Fed would leave short-term interest rates unchanged for the fifth straight meeting after a string of 17 straight increases that began in 2004. But investors had been uneasy about the central bank's economic assessment statement and whether it would indicate that policy makers are considering raising interest rates in the near future because the economy and/or inflation has been growing too fast.

"They coupled a firmer economic growth scenario with the expectation of moderate growth and they expect the inflation outlook to be improving," said John Miller, head of fund management at Nuveen Investments said of the Fed's Open Market Committee. "I don't think it makes it any more likely that they would feel compelled to raise rates."

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http://biz.yahoo.com/ap/070131/wall_street.html?.v=30