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US markets rally on Fed intent to be prudent in raising interest

09 Oct 2014 Evaluate

The US markets climbed higher on Wednesday, scoring their biggest one-day gains of the year after minutes of September Federal Open Market Committee meeting reaffirmed the central bank’s intent to be prudent in raising interest rates. According to minutes of the meeting released, several top Federal Reserve officials wanted last month to rewrite their guidance that short-term interest rates were likely to stay low for a considerable time but held off in part because of concern that the market would view that as a fundamental shift in policy. The central bankers were also worried about the economic impact of the stronger dollar. The Fed staff trimmed its medium-term GDP forecast because of the stronger currency. Fed officials discussed how to change the guidance, with several ideas floated, but all generally agreed it would be a challenge to do so without sending unintended signals to markets. The September minutes clearly showed the divide between the hawks and the doves on the committee on inflation and the health of the labor market. Some hawks see a risk that wages and inflation will begin to move up noticeably, while others are concerned that inflation is unlikely to rise even to the central bank’s 2% target.

Dow Jones Industrial Average added 274.83 points or 1.64 percent to 16,994.22, Nasdaq was up by 83.39 points or 1.90 percent to 4,468.59, while S&P 500 ended higher by 33.79 points or 1.75 percent to 1,968.89.

The Indian ADRs closed mostly in green on Wednesday; HDFC Bank was up by 1.46%, ICICI Bank was up 1.33%, Tata Motors was up by 1.22% and Wipro was up 0.16%. On the other hand, Dr. Reddy’s Lab was down by 0.61%.

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