TSX, Wall Street rally as Fed hikes interest rates

Read: Fed hikes key rate for second time in three months

In recent months, there continues to be indicators that ultra-low borrowing rates are no longer needed to help the economy grow as gauges on job growth, retail sales, consumer prices and housing builds have all come in higher than analysts had been expecting.

The Fed also noted that inflation, after lagging at low levels for years, has picked up and was moving near its 2% cent target.

The bank said it still projects there will be only three rate hikes this year, unchanged from its last forecast in December.

Many economists think the next hike won’t occur until at least June, given that the Fed likely wants time to assess whether Congress will pass President Donald Trump’s ambitious program of tax cuts, deregulation and increased spending on infrastructure.

On Wall Street, the Dow Jones industrial average advanced 112.73 points to 20,950.10, the S&P 500 index rose 19.81 points to 2,385.26, and the Nasdaq composite index added 43.23 points at 5,900.05.

But the announcement put a damper on the greenback, sending the currency lower.

As a result, the Canadian dollar climbed 0.99 of a U.S. cent at US75.15¢, amid higher crude prices. The April crude contract was up US$1.14 at US$48.86 per barrel after being in negative territory for seven sessions in a row.

Portfolio manager Luciano Orengo said although the increase was anticipated, financial markets read the forecast as more “dovish.” Some had believed the Fed would change its plan to raise rates four times this year, not three.

“The statement didn’t have a more hawkish announcement. It’s just reiterating what was said in December,” said Orengo, who works at Manulife Asset Management. “Basically they’re going to stay the path.”

In Toronto, the S&P/TSX composite index gained 141.30 points, or nearly one per cent, at 15,520.91, as gold, materials and metals stocks led advancers.

Financials were the only decliner, down by 0.47% after Canada’s financial consumer watchdog is launching a review of business practices among the major banks following reports citing unnamed employees who alleged the lenders were signing customers up for services without their consent.

Read: FCAC to review banks’ business practices

The review, which is set to begin next month, comes after the CBC reported that some employees from Canada’s five biggest banks alleged they felt pressured to upsell, trick and even lie to customers to meet sales targets that were unrealistic.

In other commodities, the April gold contract lost US$1.90 at US$1,200.70 an ounce, May copper was up US2¢ to US$2.66 a pound, and April natural gas rose US4¢ at US$2.99 per mmBTU.

With files from The Associated Press