During a news conference after the two-day policy meeting, US Federal Reserve Chair Jerome Powell stated that gaining confidence that inflation was falling towards the 2% target would take longer than expected. As a result, the Fed decided to keep interest rates at a 23-year high of 5.25-5.50% in order to maintain control over prices.
While the Fed’s preferred inflation index has decreased from its peak in 2022, it still remains above the 2% target at 2.7%. Powell emphasized that rate cuts would depend on future data and how certain they were about the path forward. He also mentioned that it was unlikely for the next policy rate move to be a hike at the June meeting.
The announcement led to a rally in US stocks initially, with the S&P 500 seeing an increase of 1.2% before closing at 0.3%. However, investors processed the decision and mostly ended down as they realized that rate cuts were not imminent and that inflation was still too high. In Europe, London’s FTSE 100 fell by 0.3%, while markets in Hong Kong and Shanghai were closed for a holiday in Asia. Japan’s Nikkei 225 index was down by 0.64% in early trading, adding to the uncertainty surrounding global markets.
