Shares rise rapidly: the fear of recession is easing

Stocks will increase on Thursday in different parts of the world. Many investors believe that a larger-than-usual interest rate cut by the US Federal Reserve will prevent a recession.

Among the three main US stock indexes, the S&P 500 gained 1.6 percent, the Dow Jones Industrial Average 1.0 percent, and the Nasdaq 2.6 percent one hour after the start of trading on Thursday.

On Wednesday, the central bank decided to cut its key interest rate by 0.50 percentage points and gave a strong hint that interest rate cuts will continue during the fall. When the central bank lowers its key interest rate, it tends to increase household consumption and business investment.

“Director general Jerome Powell said well at the press conference that if the same information as Wednesday had been used in the previous meeting [heinäkuussa]the policy rate would have been cut then. I would believe that this message specifically convinced the market that the central bank will not start interest rate cuts in the latter train and that the fear of recession has decreased”, says the chief strategist of the financial company SEB Jussi Hiljanen.

The central bank based on the economic forecast released on Wednesday, the US economy will grow by 2.0 percent this year and by the same amount next year and in 2026.

Based on the forecast, the increase in consumer prices, or inflation, will slow down to 2.3 percent this year, 2.1 percent next year, and 2.0 percent in 2026.

“The U.S. central bank hinted that it will continue to cut interest rates this year and next year, which is why recession worries have moved aside and the mood in the market has become more cheerful,” says the financial company Nordea’s asset management strategist Dear Alava.

In Europe, the broad-based Stoxx Europe 600 stock index gained 1.3 percent in the evening.