U.S. Stocks Diverge Following Fed’s Rate Hold
(MENAFN) US equities closed mixed Wednesday after the Federal Reserve opted to keep the federal funds rate unchanged, maintaining it within the 4.25% to 4.50% band.
Fed Chair Jerome Powell also hinted that the central bank’s policy will likely remain steady at the upcoming September meeting.
The Dow Jones Industrial Average fell 0.38%, losing 171.71 points to finish at 44,461.28, while the S&P 500 edged down 0.12%, or 7.96 points, closing at 6,362.9.
Conversely, the tech-heavy Nasdaq Composite rose 0.15%, gaining 31.38 points to close at 21,129.67.
Following the Fed announcement and Powell’s remarks, markets rallied somewhat as investors weighed the bank’s cautious stance, awaiting clearer inflation signals influenced by tariffs.
According to the Fed, economic growth slowed during the first half of the year, with ongoing volatility in net exports continuing to impact the data.
At a press briefing, Powell clarified that no decisions have been made regarding policy for September.
"We don't do that in advance. We will be taking that information into consideration and all the other information we get," he said.
He emphasized that the Fed wants to assess whether President Donald Trump’s tariff measures will trigger sustained inflation before considering any rate cuts.
"A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level, but it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed," Powell stated.
Noting that the impact of higher tariffs is now more visible in the prices of certain goods, he said the broader consequences for economic growth and inflation remain uncertain.
“But we are still a ways of seeing where things settle down. We are getting clearly more and more information and I think at this point people's estimates, our estimates, outside estimates of the effective level of tariffs is not moving around that much at this point," he added.
On the economic data front, US gross domestic product (GDP) grew at an annual rate of 3% in Q2, surpassing forecasts of 2.5%.
Shortly after the GDP release, President Trump reiterated his call for the Fed to reduce interest rates.
Describing the report as “WAY BETTER THAN EXPECTED,” Trump tweeted on Truth Social: “No Inflation! Let people buy and refinance their homes.”
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