The surge ended a wild day of trading in which the Dow Jones industrial average dipped in and out of negative territory four times, before finishing the session up 429 points. That represented a nearly 4% rise, the largest increase in two years.
Investors seemed uncertain about what to make of the announcement by the Fed’s main policymaking board, which for the first time set a firm date for maintaining the near-zero target for short-term interest rates.
According to Bloomberg News, this move could provide businesses and consumers with greater certainty about the availability of low-cost borrowing as they consider making investments or major purchases, such as homes or autos.
At the same time, the Fed declined to make any significant new efforts to bolster the US flagging recovery. A dissent by three of the policy committee members to the interest rate decision signaled that it could prove hard for the central bank to take dramatic steps in the coming months to lift the economy and prop up the financial system.
Wall Street investors and others had been especially interested to see whether the Fed would embark on a new round of massive bond purchases aimed at invigorating the economy.
Although the Fed has carried out two rounds of “quantitative easing,”, central bank leaders remain reluctant to pump hundreds of billions of dollars more into the economy, because they are skeptical about whether doing so would have much effect and worry that it could spark inflation.
The Fed board, however, was frank about its fears for the recovery, acknowledging, “Economic growth so far this year has been considerably slower” than the committee had expected and that threats to the economy have mounted.
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