The big decision from the US Federal Reserve’s Federal Open Market Committee’s (FOMC) June meeting is the unchanged benchmark interest rates at 4.25 per cent to 4.5 per cent.
The US Federal Reserve had last eased its interest rates in December, 2024 by 25 basis points (bps).
The Fed Chair Jerome Powell said inflation in the prices of goods was expected over the summer because of US President Donald Trump’s tariffs, which would start showing effects on consumer goods. The US continues to hold talks and deliberations with multiple countries over trade tariffs.
Powell also advised caution about placing too much stock in the central bank’s interest rate forecasts, which could change based on incoming data, especially on inflation.
The US Fed also showed its ‘dot plot’ chart projections, which reflect the data on each Federal Reserve official’s expectations for where interest rates will head in the future. Wednesday’s meeting showed that the median of Fed officials expect to lower the key benchmark interest rates by 50 basis points or 0.50 per cent, in 2025. The officials have revised their 2026 outlook to only 25 bps of rate cuts, which is down from the previously projected 50 bps.
The dot plot also portrayed an outlook of Fed Fund rate around 3.4 per cent in 2027.
Economic projection in the meeting pointed to further stagflationary pressures, and forecast lower GDP of 1.4 per cent, which is down 0.3 per cent from March’s projection.
In India, stock markets traded flat with a negative bias as investors remained cautious after Powell’s comments, and increasing tensions in the Middle East.
The Sensex was down 30.58 points, or 0.04 per cent, at 81, 414.08, while Nifty 50 was trading 3.45 points, or 0.01 per cent, lower at 24, 809.65.
Gold prices traded higher as the Iran-Israel conflict buoyed safe-haven demand. Spot gold rose 0.2 per cent to $3,376.48 an ounce, while US gold futures eased 0.4 per cent to $3,393.70.
The dollar index, which measures the currency against six other units, was at 98.957 and set for a 0.8 per cent gain for the week. This was its strongest performance since February.
The Euro was at $1.14805, and heading for a 0.6 per cent drop in the week – its biggest decline since May. The Yen was at 144.86 per dollar. Sterling was 0.18 per cent lower at $1.3398.
Asian share markets traded mixed on Thursday. Japan’s Nikkei 225 fell 0.27 per cent, Topix fell 0.12 per cent. South Korea’s Kospi gained 0.76 per cent and the Kosdaq rose 0.37 per cent. Hong Kong’s Hang Seng index futures indicated weaker opening.
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