The Federal Reserve set the stage for a series of interest rate increases beginning next spring, completing a major policy pivot that showed much greater concern about the potential for inflation to stay high. Most central bank officials, in projections released Wednesday at the conclusion of their two-day meeting, penciled in at least three quarter-percentage-point rate increases next year. In September, around half of those officials thought rate increases wouldn't be warranted until 2023. For months, Fed leaders had stuck to a view that higher price pressures this year were caused primarily by supply-chain bottlenecks and would ease on their own. But Fed Chairman Jerome Powell had in recent weeks signaled much less conviction about that forecast, and the projections Wednesday suggest most of his colleagues share his concern. In economic projections released Wednesday, most Fed officials project core inflation to reach 4.4% at the end of this year before declining to 2.7% next year and 2.1% by the end of 2024. That is up from projections in September that inflation would slow from 3.7% to 2.3% at the end of next year. Fed officials' decision to take their foot off the gas more quickly reflects a shifting calculus about the potential for stronger demand to push up prices--such as wages and rents -- even after supply-chain bottlenecks and shortages of items such as cars abate.

After the losses of the previous days, the Swiss stock market regained some lost ground in the middle of the week. The SMI gained 1 per cent to 12,531 points. Among the 20 SMI stocks, there were 17 price gainers and three price losers. 28.24 (previously: 28.21) million shares were traded. The shares of Credit Suisse (-0.5%) and UBS (-0.9%), which had held up better than the market the previous day, now lagged behind. Holcim (-0.2%) was also sold on the news. The SMI was led by Lonza, which recovered from its recent losses with a gain of 2.8 per cent. However, the benchmark index was supported by heavyweight Nestle, which ended 1.1 per cent higher. Pharmaceutical stocks Novartis and Roche, also heavily weighted, posted gains of 0.4 and 1.6 per cent respectively.

European equity markets ended Wednesday's session in mixed order as they awaited the Federal Reserve's (Fed) monetary policy announcements. The Stoxx Europe 600 index gained 0.3% to 470.8 points. In Paris, the CAC 40 and the SBF 120 gained 0.5% and 0.4%, respectively. In Frankfurt, the DAX 40 gained 0.2%, while the FTSE 100 in London gave up 0.7%. Sanofi SA and GlaxoSmithKline PLC said Wednesday that a single booster dose of their Covid-19 vaccine candidate delivered consistently strong immune responses. Preliminary results from a clinical trial looking at the safety and immunogenicity of the booster shot showed that neutralizing antibodies increased regardless of whether participants had been initially vaccinated with the shot made by AstraZeneca PLC, by Pfizer Inc. and BioNTech SE or by Moderna Inc., the two pharmaceuticals companies said. International Consolidated Airlines Group SA said Wednesday that discussions to terminate the agreement to buy Spanish airline Air Europa from Globalia Corporacion Empresarial were at an advanced stage. IAG—which owns British Airways and Iberia among other airlines—said in January that it had agreed to acquire Air Europa for an equity value of 500 million euros ($563 million) instead of the original EUR1 billion agreed with Globalia in 2019.

U.S. stocks turned higher after Federal Reserve officials approved plans to more quickly wind down the central bank's pandemic stimulus efforts. The S&P 500 rose 1.6%, reversing earlier declines and ending the day near a record. The Dow Jones Industrial Average added about 1.1%. The Nasdaq Composite Index surged 2.15%. Accommodative monetary policy has helped propel U.S. indexes to dozens of records since the arrival of the coronavirus pandemic sent stocks swooning in early 2020. But surging consumer prices have intensified the focus by Fed officials on curbing inflation. Investors are eager for the central bank to shed light on its plans for ending asset purchases and raising rate. All three major U.S. indexes turned higher after the release of the much-awaited Federal Reserve statement and continued to climb as Jerome Powell spoke at a news conference. Fed officials voted to hold rates near zero Wednesday but most signaled they were ready to lift their short-term benchmark rate at least three times next year. They also approved plans to more quickly wind down pandemic stimulus efforts. Stocks had pulled back this week as investors awaited the update from the central bank. Some investors said that uncertainty about the Fed's next moves, rather than unhappiness with the potential changes in monetary policy, may have weighed on shares in recent sessions. The market's reaction to the Fed statement was "almost like a sigh of relief," said Anu Gaggar, global investment strategist at Commonwealth Financial Network. "It's like that uncertainty has been lifted." Amtrak named Stephen Gardner its new chief executive on Wednesday, tapping a longtime executive to manage the biggest infusion of federal funding in the railroad’s half-century history. Mr. Gardner, Amtrak’s current president, has served at the national passenger railroad since 2009 and is the architect of its plans to expand rail service between cities across the country. He will assume the top post when outgoing CEO Bill Flynn retires on Jan. 17, the company said.

The stock markets in East Asia only partially join Wall Street's positive reaction to the latest decisions by the US Federal Reserve on Thursday. In Tokyo, the Nikkei index shot up by 1.9 per cent to 28,991 points. Here, the continued strength of the dollar also provides a tailwind, which improves the export prospects of Japanese companies. Seoul and Shanghai, on the other hand, are only well maintained and in Hong Kong the HSI is down 0.7 per cent. In Hong Kong, concerns dominate that the US could blacklist more Chinese companies in which US companies are not allowed to invest or whose business relations with the US are restricted.

In the US bond market, yields rose for the most part with the prospect of monetary policy tightening.

CS lowers Stadler Rail target to CHF 40 (43) – Neutral
CS raises ABN Amro to Neutral (Underp.) – Target EUR 14
IR lowers Tui target to EUR 2.20 (2.30) – Sell

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