US stocks open higher ahead of Fed decision....
• The Federal Reserve is set to announce its latest decision on interest rates at 2 p.m. ET. Markets overwhelmingly expect the central bank to hold rates steady for the fifth-straight meeting.
• President Donald Trump has been pressing hard for the Fed to cut rates, arguing that his tariff policy will not push up inflation. But central bankers aren’t so sure, and prefer to wait to monitor the impact of Trump’s economic agenda before making any moves.
• However, officials at the central bank could dissent by a margin not seen in 30 years. Governors Michelle Bowman and Christopher Waller have openly supported the idea of a rate cut in July.
Stocks opened modestly higher on Wednesday as investors digested the latest data on economic growth and awaited the Federal Reserve’s decision on interest rates.
The Dow opened higher by 26 points. The broader S&P 500 gained 0.1%, and the tech-heavy Nasdaq Composite rose 0.2%.
Wall Street this afternoon will be fixated on Fed Chair Jerome Powell’s press conference at 2:30 p.m. ET. to try and glean insights about how the central bank is interpreting the impact of tariffs on the health of the economy.
“My expectation is more of the same. And when I say more of the same, that’s a reflection on what Powell has been driving home, that they want to have this degree of patience,” Tom Porcelli, chief US economist at PGIM Fixed Income, said.
“The labor market has been softer than I think some folks appreciate,” Porcelli said. “Maybe there’s some tacit acknowledgement that things are a little softer beneath the surface.”
Mohit Kumar, chief strategist and economist for Europe at Jefferies, said in a note that he expects Powell to highlight the uncertainty in projecting inflation and economic growth due to lingering tariffs.
“The Fed will need to wait for more data before it could act,” Kumar said. “Our view remains that we could see some weakness in the employment data in the coming months which should drive the [Fed] to deliver the next rate cut in September and a total of two rate cuts this year.”
President Donald Trump has made it no secret: He wants interest rates to go down, including the rates the government pays to borrow money. But why is he so intent on a supersized cut?
Ahead of the Federal Reserve’s interest rate decision on Wednesday, Trump posted on Truth Social: “MUST NOW LOWER THE RATE…Let people buy, and refinance, their homes!”
When the Fed lowers its key rate, known as the federal funds rate, it generally causes interest rates on a variety of loans to also go down. However, that isn’t always true. For instance, when the central bank began lowering rates in September last year, mortgage rates moved higher.
Additionally, lowering interest rates too quickly or by too much can invite higher inflation if it causes people to spend a lot more, giving companies a pathway to raise prices.
That’s why the Fed has been hesitant to lower rates, especially with Trump’s tariff increases eventually expected to cause consumer goods prices to increase. For the time being, however, price increases have not been broad-based.