NEW YORK — Global equity markets surged Thursday after the US Federal Reserve and European Central Bank issued rare coordinated statements suggesting interest rate cuts could begin as early as next quarter, ending a two-year cycle of aggressive tightening that has squeezed consumers and businesses worldwide.
The Dow Jones Industrial Average gained 847 points, or 2.1%, while the S&P 500 climbed 2.4% to its highest level since early last year. European indices closed up between 1.8% and 2.6%.
What Changed
Both central banks cited "meaningful progress" on inflation, which has fallen to 2.4% in the US and 2.7% in the eurozone — close to their 2% targets. Fed Chair Jerome Powell acknowledged that "the balance of risks has shifted" and that the bank would now weigh unemployment concerns alongside inflation.
Mortgage brokers reported a surge in enquiries within hours of the announcement, while the dollar weakened against most major currencies as traders priced in lower US yields.
Economists warned against complacency, however. "Rate cuts are not guaranteed, and the path will depend entirely on data," said Goldman Sachs chief economist Jan Hatzius. "One bad inflation print could change everything."