EDITOR'S NOTE
It was a historic day for the Federal Reserve with wide-ranging ramifications for capital markets.
Fed Chairman Jerome Powell unveiled Thursday a new framework in which the central bank formally agreed to a policy of "average inflation targeting," writes CNBC's Jeff Cox. In other words, the Fed will let inflation run above its 2% target for "some time" after struggling to bring the rate to that area.
Powell also hinted that unemployment data can stay lower for longer before the Fed starts thinking about raising rates. This led to a decline in short-term yields and gains in long-term yields.
This is Powell saying they "don't want the job market strong for just Wall Street bankers and people that are doing really well. 'We want it strong for the people that need it the most in this particular time,'" said Gregory Faranello, head of U.S. rates trading at AmeriVet Securities. "It was a very powerful day for Powell" and the Fed.
The news pushed the Dow Jones Industrial Average higher as bank shares, along with Microsoft, drove the gains. The 30-stock average briefly erased its losses for 2020 at one point. However, declines in tech — the leaders since the late-March bottom — capped the broader market's gains.
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