NEW YORK – Stock prices rose Wednesday after U.S. and Japanese central banks reaffirmed plans to keep interest rates low in an effort to drive economic growth.
A report on inflation at the wholesale level provided further assurance that the Federal Reserve shouldn't have to raise its key lending rate anytime soon. The Fed said Tuesday it would hold its key interest rate at historic lows.
Japan led overseas markets higher after its central bank kept a key interest rate at 0.1 percent and expanded money available through its short-term lending program.
The Labor Department's Producer Price Index fell 0.6 percent in February, its steepest drop in seven months. Economists polled by Thomson Reuters forecast a drop of 0.2 percent.
A decline in energy prices helped push the index lower last month. Excluding volatile energy and food costs, the index rose 0.1 percent. That was in line with expectations.
The benign figures back up the Fed's belief that inflation isn't a concern, allowing it to maintain low lending rates. The Fed wants to keep rates low to encourage economic growth. Economic reports in recent months have shown the recovery has been slow and uneven. High unemployment still remains the biggest stumbling block to a sustained rebound.
As the economy recovers, inflation will eventually become a concern. That could force the Fed to raise rates. But the Fed doesn't want to raise rates too soon and upend a rebound.
Fed Chairman Ben Bernanke is set to testify Wednesday before Congress about banking regulation reform.
The Dow Jones industrial average rose 23.43, or 0.2 percent, at 10,709.41. The Standard & Poor's 500 index rose 3.32, or 0.3 percent, at 1,162.78, while the Nasdaq composite index rose 5.05, or 0.2 percent, at 2,383.06.
Stocks rose late Tuesday after the Fed's announcement about interest rates and the economy. The Dow rose 43 points and is now at its highest level since mid-January. The S&P 500 rose 9 points to close at its highest level since October 2008.
The market has been posting steady gains for about a month. The Dow has risen six straight days.