Wall Street stocks rallied and the dollar retreated Wednesday as the Federal Reserve again proceeded with a large interest rate hike, maintaining its forceful stance to combat inflation.
The US central bank carried out the second straight 75 basis point increase, and the fourth rate hike this year, moving aggressively to cool the strongest surge in inflation in more than four decades without derailing the world's largest economy.
Following a positive session in European equity markets, US stocks were also up prior to the Fed's 1800 GMT announcement.
But equities pushed even higher during Fed Chair Jerome Powell's news conference, where he described the US economy as slowing but not in recession.
Analysts said the central bank's move met market expectations and they took heart in Powell's statements that implied the central bank could undertake smaller interest rate hikes later in 2022 after two straight super-sized increases.
Wall Street "is contemplating less aggressive monetary policy at least on the Fed Funds rate as we move from the third quarter into the fourth quarter," said Art Hogan, chief market strategist at B Riley Wealth Management.
All three major US indices enjoyed solid gains, with the S&P 500 finishing up 2.6 percent.
The dollar also pulled back against the euro and other currencies in a sign the Fed's stance was seen as less hawkish than expected.
On Thursday, all eyes will be on second-quarter US growth data, which could show the US economy is technically in recession according to one leading benchmark.
GDP in the first quarter contracted 1.6 percent. Two quarters of negative growth are generally considered a sign the economy is in recession, although that is not the official criteria.
Powell noted the Fed's mandate is to promote price stability and full employment, not to make declarations about recessions -- but added he did not consider current conditions consistent with such a categorization.
A recession is "a broad-based decline across many industries that is sustained for more than a couple months," Powell told reporters.
"What we have right now doesn't seem like that. The real reason is that the labor market is just sending such a strong signal of economic strength that it makes you really question the GDP data."
- New Credit Suisse CEO -
In Europe, shares in London rose 0.6 percent, Paris climbed 0.8 percent and Frankfurt added 0.5 percent.
On the corporate front, Switzerland's scandal-hit banking giant Credit Suisse appointed a new chief executive as higher litigation costs and financial market volatility pushed it deeper into the red.
Ulrich Koerner, head of asset management at the bank, takes the reins from Thomas Gottstein on Monday.
The bank has been hit by a series of scandals and crises including the implosions of financial services firms Greensill and Archegos last year.
After starting the day lower on the Swiss stock exchange, Credit Suisse shares rose one percent.
Back on Wall Street, very large gains were enjoyed by both Microsoft, up 6.7 percent, and Google parent Alphabet, up 7.7 percent, despite reporting lower profits that were still not as bad than feared.
- Key figures at around 2110 GMT -
New York - Dow: UP 1.4 percent at 32,197.59 (close)
New York - S&P 500: UP 2.6 percent at 4,023.61 (close)
New York - Nasdaq: UP 4.1 percent at 12,032.42 (close)
London - FTSE 100: UP 0.6 percent at 7,348.23 (close)
Frankfurt - DAX: UP 0.5 percent at 13,166.38 (close)
Paris - CAC 40: UP 0.8 percent at 6,257.94 (close)
EURO STOXX 50: UP 0.9 percent at 3,607.78 (close)
Tokyo - Nikkei 225: UP 0.2 percent at 27,715.75 (close)
Hong Kong - Hang Seng Index: DOWN 1.1 percent at 20,670.04 (close)
Shanghai - Composite: DOWN 0.1 percent at 3,275.76 (close)
Euro/dollar: UP at $1.0201 from $1.0117 late Tuesday
Pound/dollar: UP at $1.2151 from $1.2028
Euro/pound: DOWN at 83.85 pence from 84.11 pence
Dollar/yen: UP at 136.51 yen from 136.91 yen
Brent North Sea crude: UP 2.1 percent at $106.62 per barrel
West Texas Intermediate: UP 2.4 percent at $97.26 per barrel