On Wednesday, an air of uncertainty clouded the U.S. stock market as Wall Street started to question if the Federal Reserve will impart stimuli to the economy through interest rate cuts by September. The S&P 500 waned slightly by 0.1%, retracting from its unprecedented streak of setting record highs for six consecutive days. The Dow Jones Industrial Average encountered a 171-point drop, sliding 0.4%, while the Nasdaq composite experienced a marginal ascension of 0.1%.
The burdening pressure on the stock market escalated as Treasury yields in the bond market began to rise. This reaction followed the Federal Reserve’s decision to retain its prevailing interest rate. This decision is likely to ruffle the feathers of President Donald Trump. His administration has been robustly advocating for a decrement in interest rates. However, this decision practically resonated with the expectations held by Wall Street.
The more unexpected aspect for investors was perhaps the stance of Jerome Powell, the Fed Chair. He thwarted projections of an impending rate cut in the Fed’s next assembly scheduled for September. Besides Trump, the chorus for lower rates has another couple of advocates within the Fed’s policymaking committee, who view this as a measure to alleviate economic strains.
The aforementioned committee members made their dissent clear in Wednesday’s vote. Regardless, Powell refrained from guaranteeing a rate reduction during the upcoming September meeting. He highlighted that inflation persists in outnumbering the Fed’s 2% benchmark and depicted the job market as essentially ‘balanced’.
A plummet in rates could rejuvenate the labour market and the broader economy. Concurrently, it might also spark inflation at a time when Trump’s tariff policies might escalate consumer prices in the U.S. The Fed’s fundamental role is to sustain equilibrium in both the job market and inflation.
In Powell’s words, ‘The economy is in good shape, but it’s in an unusual situation.’ Before making the decision on rate cuts in the September meeting, the Fed would consider two months’ worth of data encompassing inflation, job market statistics, and other crucial economic indicators.
The post Wall Street Sweats as Fed Hints at No Rate Cuts appeared first on Real News Now.
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