Hello, financial researchers and crypto enthusiasts! Just now, the press conference of the Chief of Money in the USA, Federal Reserve Chairman Jerome Powell, has concluded. After the Fed left the base interest rate unchanged today (no sensation, everyone was expecting this), all attention shifted to his speech – after all, that's where the keys to understanding future policy are hidden. And Mr. Powell did not disappoint, providing the markets with food for thought and, as always, adding a bit of uncertainty.
The main message Powell tried to convey was something like: "We are in no hurry to lower the rate, guys." He confirmed that the Fed is currently taking a wait-and-see approach. Why such caution? It's all about the complex economic cocktail and increased risks.
Powell acknowledged that the US economy continues to show "solid" growth and the labor market remains strong – this is sort of good news that could calm recession fears (by the way, he said that the risk of recession has increased but is still "low"). However, inflation, although it has decreased from its peaks, remains "somewhat elevated." And this is where the factor of tariffs comes into play. Powell emphasized that the uncertainty surrounding their impact on the economy has significantly increased. The Fed does not yet fully understand how these trade barriers will affect inflation (will they push it up?) and economic growth (will they slow it down?). This creates a real puzzle for the regulator.
Imagine that the Fed is trying to steer a ship in the fog: the instruments indicate a good course, but the sonar detects some new obstacles (tariffs), and the compass (inflation) is behaving a bit capriciously. In such a situation, jerking the course is dangerous. Powell essentially confirmed: the Fed will sit quietly and wait until the fog clears and the instrument readings become more unambiguous. He even stated that the risks of both unemployment and inflation now seem higher. This is not what the markets with "dovish" expectations were eager to hear.
And the markets reacted accordingly – somewhat chaotically, but overall with hints of caution. US stocks followed a winding trajectory: at first, they seemed pleased with the words about a "robust" economy and bounced back from the day's lows, but then, after digesting the entire set of Powell's statements (risks, uncertainty, tariffs, "no hurry"), they began to show mixed dynamics by closing. The Dow Jones held a decent gain (thanks, apparently, to traditional industrial companies), the S&P 500 was around zero or slightly below, while the tech-heavy Nasdaq fell, likely under pressure from giants like Alphabet, which had its own corporate news (the situation with Apple and the search engine clearly did not add optimism).
As for other assets: the dollar, which usually strengthens when the Fed is not in a hurry to cut rates, has risen slightly. Meanwhile, the yield on US government bonds (a kind of litmus test for rate expectations) has decreased somewhat, which may reflect a reaction to the overall increase in uncertainty, despite the "hawkish" tone of the rhetoric.
Interestingly, markets are still pricing in several rate cuts by the end of the year, even though Powell directly stated that there is no rush and it's still "too early to determine" which issue (inflation or unemployment) will be more serious. This gap between expectations and the official stance of the Fed remains and is a source of potential movements.
In addition to macroeconomic topics, corporate news also influenced the market, as we saw with Disney (soaring by 10%!) and Alphabet (falling by more than 8%).
In general, the conclusion is this: the Fed is on pause, Powell signals increased caution due to uncertainty primarily caused by tariffs and conflicting economic signals. Markets reacted mixed, digesting this complex picture. Now everyone will again be waiting for new batches of economic data to understand where the Fed will swing the pendulum next. The coming months promise to be interesting, especially considering the trade negotiations on the horizon. Let's stay connected and keep an eye on the numbers!