Futures contracts for the S&P 500 index rose to a new high on Thursday morning after minutes from the US Federal Reserve’s latest meeting showed the central bank remains committed to supporting the economy.
Investors were in a cautiously optimistic mood after the minutes from the Fed showed that the central bank’s policymakers intended to keep purchasing US bonds at a rapid rate and hold interest rates near zero.
Most of the Federal Open Market Committee’s 18 officials at the meeting expected rates to stay near zero through 2023.
They thought the “current guidance for the federal funds rate and asset purchases was serving the economy well,” the minutes said.
Padhraic Garvey, head of Americas research at ING, said: “The central interpretation of the FOMC minutes is of a Federal Reserve that remains doggedly dovish.
“Policy rates will remain low until there has been a material recovery on the labour market. Forecasting recovery is not enough; it needs to actually happen.”
Jim O’Sullivan, chief US macro strategist at TD Securities, said in a note: “The FOMC meeting minutes reinforced our view that Fed officials are in no rush for either tapering or tightening.”
O’Sullivan said TD expected the Fed to start trimming its bond purchases in September 2022 and raising rates in September 2024.
The US bond market suggests investors have become slightly less concerned by the prospect of strong inflation and the possibility that the Fed might cut back support sooner than expected.
The yield on the key US 10-year Treasury note rose close to 1.8% in March but has since fallen to 1.656% on Thursday morning. Yields move inversely to prices.
Louise Dickson, oil markets analyst at Rystad Energy, said prices had slipped after the European Medicines Agency said there is a link between the AstraZeneca vaccine and rare cases of blood clots.
“Although a medical issue, any setback for COVID-19 vaccines can also cause a delay in the expected recovery for oil demand.”
The dollar index slipped 0.14% to 92.32, reflecting the fall in US bond yields, which makes the securities look relatively less attractive.
But Hussein Sayed, chief market strategist at FXTM, said: “Looking at where the US economy stands compared to the rest of the developed economies, there is still room to see the dollar considerably higher from current levels.”