Dow rises more than 100 points after Fed inflation announcement that could keep rates low

Stocks rose on Thursday after the Federal Reserve unveiled a new framework that could keep interest rates lower for a longer period of time. 

The Dow Jones Industrial Average gained 153 points, or 0.5%. The S&P 500 climbed 0.2% and the Nasdaq Composite was flat.

In a speech, Fed Chairman Jerome Powell said the central bank formally agreed to a policy of “average inflation targeting.” In other words, the central bank will let inflation run “moderately” above its 2% goal for “some time.”

The central bank has for years tried to keep inflation at 2%, a rate of price increase that policymakers consider both manageable and indicative of a healthy economy. But ever since the financial crisis, inflation in the U.S. has more often than not lagged the Fed’s target.

“This is incredible,” said CNBC’s Jim Cramer on the announcement. Powell basically said “‘we’re going to let things run. And we’re not going to be a part of the equation until the economy actually does even better than we think.'”

Bank stocks rose broadly. Citigroup gained 0.9%. JPMorgan Chase, Bank of America and Wells Fargo were all up more than 1%. Treasury yields were also higher. The benchmark 10-year rate climbed to 0.72% and the 30-year bond yield advanced to 1.46%.

Investors also pored through fresh economic data to gauge the health of the economy. The Labor Department said Wednesday the number of Americans who filed for unemployment benefits for the first time totaled 1 million last week, in line with expectations. It marked the second consecutive week that weekly jobless claims tallied more than 1 million.

Meanwhile, second-quarter GDP was revised to a 31.7% decline, versus a 32.5% drop estimated. The initial reading on July 30 showed a 32.9% fall in economic activity. While the latest reading is slightly better, it still marks the largest quarterly plunge on record.

The prospect of continued stimulative policy could help push the major market indexes to new record highs, a feat both the Nasdaq Composite and S&P 500 clinched on Wednesday.