Fed holds rates steady, warns of rising inflation and slower economic growth

The US Federal Reserve held interest rates steady for the second time at the 4.25%-4.50% range, in line with expectations, it said in a statement following its meeting yesterday. This marks its first interest rate meeting since US President Donald Trump’s tariff-focused economic agenda took hold. The Fed previously opted to keep interest steady in January, hitting pause on a cutting spree which saw interest rates drop 50 bps in September, and 25 bps in November and December.

The rationale: While economic activity was expanding gradually and unemployment rate lows had steadied, “inflation remains somewhat elevated” and "uncertainty around the economic outlook has increased,” the Fed’s statement said. The Fed lowered its GDP growth forecast for the US to 1.7%, down from 2.1%. “Inflation has started to move up now, we think, partly in response to tariffs, and there may be a delay in further progress in the course of this year,” Fed Chair Jerome Powell said at a presser.

Going forward: The Fed will continue to assess data and the balance of risks, it said, with most policymakers still expecting two rate cuts this year.

Market reax: US stocks rose on the news, with the Nasdaq up 1.4% and the S&P gaining 1.1%, ending a streak of losses from earlier this week on the back of a sell-off in tech stocks. At the same time, investors ramped up bond purchases, reflecting concerns around economic growth.

ALSO- China’s central bank also kept key interest rates unchanged, as the country looks towards stabilizing its currency and shoring up growth.

The Bank of England (BoE) is also expected to hold interest rates at 4.5% on Thursday, as inflationary pressures persist and economic growth slows, CNBC reports. Governor Andrew Bailey warned earlier this month that Trump’s trade tariffs pose a risk to the UK economy, while the BoE projects inflation will temporarily rise to 3.7% — well above its 2% target — driven by higher energy prices.

MARKETS THIS MORNING-

Asian markets are mixed following the interest rate moves yesterday, with China’s CSI 300 dipping 0.2%, and Hong Kong’s Hang Seng index falling 1.4%. South Korea’s Kospi was up 0.3%, while Japan’s stock markets were closed for a holiday. Over on Wall Street, futures are pointing to a strong open after yesterday’s rally.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.7% yesterday on turnover of SAR 4.6 bn. The index is down 2.7% YTD.

In the green: UIHC (+3.5%), Albaha (+2.8%) and Rasan (+2.6%).

In the red: Medgulf (-10.0%), ACIG (-10.0%) and Derayah (-4.8%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.1% yesterday on turnover of SAR 30.2 mn. The index is down 2.5% YTD.

In the green:Naas Petrol (+9.6%), Enma Alrawabi (+7.0%) and Knowledgenet (+6.3%).

In the red: Neft Alsharq (-9.7%), Alnaqool (-9.5%) and Obeikan Glass (-8.6%).

CORPORATE ACTIONS-

Arabian Mills’ board recommended a dividend payout of SAR 30.3 mn for FY 2024 at SAR 0.59 per share, it said in a disclosure to Tadawul. The distribution date is yet to be announced.