Shares rose on Wednesday after the Federal Reserve raised interest rates by half a percentage point, but ruled out raising them by larger amounts in the future.

The Fed is fighting hard against inflation, delivery on Wednesday its biggest rate hike in more than two decades.

But investors were relieved after Fed Chairman Jerome Powell said politicians were not thinking of raising more than half a percentage point at a time, even as he hinted that the Fed would continue to raise interest rates.

Fears the Fed will be particularly aggressive shocked markets last week, sending stocks plummet.

“An increase of 75 basis points is not something the committee is actively considering,” Powell told reporters when asked if the Fed would consider raising the rate by three-quarters of a percentage point.

The Dow finished the day by more than 900 points and the S&P 500 increased by almost 3 percent, both of which were the best days since 2020.

However, the Fed has made it clear that fighting inflation remains its top priority after consumer prices have risen the most in 40 years.

Powell said he and his colleagues will actively consider two additional rate increases of half a point at their next two meetings in June and July.

Uncertain future of the economy

It’s not just about inflation. The Fed is facing great economic uncertainty, ranging from the war in Ukraine and ending with China‚Äôs continued repression after the COVID outbreak.

In a note to investors, Bank of America Global Research said the central bank had made clear its intention to aggressively fight inflation, but that at least it was “likely to surprise markets for a while.”

Markets are likely to remain concerned that the Fed may exaggerate with rising interest rates, leading the economy to recession.

But Powell expressed optimism that the central bank could curb inflation without stopping economic growth.

“I would say we have a good chance of a soft or soft landing,” Powell said Wednesday.

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