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Global Stocks Rally After Fed Chair Speaks to US Lawmakers

Federal Reserve Chair Janet Yellen testifies on Capitol Hill in Washington, July 12, 2017, before the House Financial Services Committee to give the semiannual monetary policy report to the Congress.

Global stock markets rose sharply Wednesday after Federal Reserve Chair Janet Yellen dampened expectations that the U.S. central bank would raise interest rates more than three times in 2017.

The central bank has already raised rates twice in 2017, and one more rate hike is expected later this year.

In testimony before Congress, Yellen said the U.S. economy is strong enough to absorb further gradual increases in the interest rate, and that despite the slow pace of growth, the world's largest economy continues to add jobs, promote consumer spending and support stronger business investment.

Addressing concerns that inflation remains below the Fed's target of 2 percent, Yellen said the Federal Funds Rate, the rate it charges other banks on overnight loans, "would not have to rise all that much further" to reach a level that neither encourages or discourages economic activity.

Stock prices rose after it became clear that Federal Reserve policy would not be as aggressive as some analysts were expecting. The Dow Jones Industrial Average, perhaps the most popular of the three major Wall Street indexes, reached a new high after Yellen's testimony.

In addition, the U.S. dollar gained and bond yields, which move opposite to price, fell sharply.