US Fed review to 'add fuel to equities' fire'

Inflation OK to climb 'above 2% over time'

The Federal Reserve's shift to an average inflation target of 2% will "add fuel to equities which are already on fire", with the combination of continued ultra-low interest rates and "extremely accommodative monetary policies for the foreseeable future" likely to support risk assets.

In efforts to support the jobs market and the US economy, Fed chair Jerome Powell said on Thursday (27 August) that after an 18-month review, the central bank would allow inflation to climb "moderately above 2% over time" and target an average of 2%. It follows the 22nd week in 23 that saw US jobless claims total more than one million, as announced earlier in the day. Powell told reporters that the Fed is now of the view that a "robust job market can be sustained without causing an outbreak of inflation". In response to Powell's speech, US equity markets opened marginally higher wi...