U.S. Indices ended Wednesday day in the green after a session that saw plenty of two-way price action in wake of the Fed decision and Powell press conference. The decision was largely as expected, with rates left unchanged, although in the accompanying statement added risks to the economic outlook increased further, and that risks to both sides of the mandate have risen. In the presser, Powell repeatedly reiterated the wait-and-see approach, to see how tariffs affect the economy before adjusting policy. Through both, markets were choppy but ultimately, not much movement was seen. Sectors were largely in the green with a couple in the red, but Communication Services was the clear laggard and hit by Alphabet (GOOGL) (-7.5%) after an Apple exec said it is exploring adding AI to search browser. Elsewhere, the Dollar was firmer to the detriment of G10 FX peers, with Antipodeans seeing the strongest selling, followed by the Japanese Yen. Treasuries chopped to the aforementioned Fed statement tweaks and Powell’s wait-and-see approach, while the crude complex was lower and sold off through the duration of the day as risk sentiment soured alongside trade updates. On the latter, EU is to reportedly announce a provisional list of tariffs against the US on Thursday, and EU is expected to target US-made cars with tariffs if trade talks fail. On China, US/China are set to meet this weekend, but Treasury Secretary Bessent stated that the Saturday talks are the beginning of talks, not advanced discussions. Moreover, US President Trump is not open to pulling back 145% tariffs to get China to the negotiating table. On Chips, Bloomberg reported that the Trump administration is planning to rescind Biden-era chip curbs as part of a broader effort to revise semiconductor trade restrictions. It looks to refashion a policy launched under Biden that created three broad tiers of countries for regulating the export of chips from Nvidia (NVDA) and others. The FOMC left rates on hold between 4.25-4.50%, as expected, in a unanimous decision. Within the statement, it said that economic outlook uncertainty has increased further (prev. uncertainty around the economic outlook has increased), and added a line that “risks of higher unemployment and higher inflation have risen.” The Fed maintained language from the March meeting that “recent indicators suggest that economic activity has continued to expand at a solid pace”, although it acknowledged “swings in net exports have affected the data”. It maintained its description of the current state of inflation and the labour market, saying “The unemployment rate has stabilised at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.” All in all, the rate decision was largely as expected, but the tweaks in language surrounding uncertainty in the economic outlook and increased risks to both sides of the mandate were the highlights. In Powell’s presser, attention will be on any further clarity surrounding the path ahead for the Fed, and whether he maintains his “wait-and-see” approach, while also paying attention to any communications around Trump tariff impacts. In Chair Powell’s press conference and Q&A, he largely reiterated a familiar tone, stating that the current stance of policy leaves the Fed well-positioned to respond in a timely manner, and that the Committee is in “wait-and-see” mode to assess the impact of tariffs before making the next move. Speaking on tariffs, the Chair said so far they have been significantly bigger than expected and the Fed has not seen big economic effects in the data yet, adding people are worried but the shock has not yet hit. Powell added that as the economy continues to evolve, the Fed will determine the appropriate policy stance, and if dual mandate goals are in tension, they will consider distance from the goal, and time to close gaps. When further questioned about what side of the mandate is at greater risk, he said it is too early to say which way risks will shake out, and once again reiterated that are in no hurry, and can they be patient. However, the Chair did state that when things develop, the Fed can move quickly if appropriate. Powell was later questioned about the path for a soft landing, and if higher inflation and higher unemployment were seen, the Fed would not see further progress towards their goals and would see a delay in getting to goals for the next year. Right now, it is not a situation where they can be pre-emptive and need to see more data. On future rate decisions, when asked about March projections for two rate cuts, stated the Fed can’t make a projection now, and we will have to wait until June [for updated SEPs]. Fed Chair Powell stressed that until they know more, the Fed can wait and see, adding that everyone on the committee supported waiting. He also added that the costs of waiting are fairly low. Note, Governor Waller has recently been dovish and warned if the Fed waits until the new policies are seen in the hard data, it would likely be too late. Elsewhere, both Oil and Gold closed lower by 1.75%.
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