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-

The ADX fell 0.3% yesterday on turnover of AED 1.2 bn. The index is up 0.2% YTD.

In the green: Fujairah Cement Industries (+3.7%), Sudatel (+3.4%) and RAK Ceramics (+2.8%).

In the red: National Bank of Umm Al Qaiwain (-4.8%), Abu Dhabi Islamic Bank (-3.7%) and Americana Restaurants (-3.4%).

Over on the DFM, the index fell 0.6% on turnover of AED 453.1 mn. Nasdaq Dubai was down 0.6%.

CORPORATE ACTIONS-

Abu Dhabi Aviation’s board approved a dividend payout of AED 329.0 mn, equivalent to 30 fils per share, for 2024, according to a disclosure (pdf).

NMDC Group’s board approved the distribution of AED 2 bn in special interim dividends, equivalent to AED 2.37 per share, according to an ADX disclosure (pdf). Shareholders also approved a cash dividend of AED 700.8 mn (83 fils per share) for 2024.

Empower approved an AED 437.5 mn cash dividend for 2H 2024, equivalent to 4.4 fils per share and 43.8% of its paid-up capital, bringing the company’s total 2024 dividend to AED 862.5 mn (or 8.6 fils per share), according to a DFM disclosure (pdf). Shareholders also approved a commitment to annual dividends of AED 875 mn for 2025 and 2026, to be disbursed in two installments each April and October.

Al Mal Capital REIT declared a final dividend of AED 20.56 mn for 2024 at 4.00 fils per unit, according to a DFM disclosure (pdf). Together with the AED 15.4 mn interim dividend paid in August 2024, total distributions amount to 95.9% of net income before revaluation of investment properties.

Emirates Ins. Company’s board proposed a 50 fils per share dividend for FY 2024, pending approval from the Central Bank of the UAE, according to an ADX disclosure (pdf).

Aldar Properties will distribute AED 1.5 bn in dividends for 2024, equal to 18.5 fils per share, after the move was finalized in a general assembly meeting, according to a disclosure (pdf) to the ADX.

Dubai Taxi is set to distribute AED 122.3 mn in dividends for 2H 2024, representing 85% of net profit for the period, the firm said in a disclosure (pdf) to the DFM.

The National Bank of Ras Al Khaimah (Rakbank) approved updating its USD 2 bn Euro medium term note program and listing the offering on the London Stock Exchange (LSE), it said in a disclosure (pdf) to the ADX.