The Federal Reserve held interest rates steady at its meeting yesterday, putting on hold a monetary easing cycle that saw three consecutive rate cuts late last year. The key rate remains unchanged at 3.5-3.75%.

“Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization,” the Fed said in a statement.

The AI effect: When asked about the divergence between strong GDP growth and a soft labor market during the press conference, Fed Chair Jerome Powell said it may be down to increased productivity, and that AI may have played a role. He cautioned that reading the labor market is difficult because of the unusual situation where both the demand and the supply of labor have fallen, due to lower immigration and slower job growth.

Powell is facing a barrage of attacks from the Trump administration. The war between the White House and the Fed turned into a legal showdown this month as Powell publicly attacked a DOJ probe into HQ renovations his office ordered, calling it a “pretext” for President Trump to force interest rate cuts.

Trump has been adamant in demanding rate cuts to stimulate the economy, while the Fed remained reluctant to accelerate the easing pace amid fears of stoking inflation, which “remains somewhat elevated,” the Fed’s statement said. Yesterday’s decision to hold the rates unchanged saw two dissents, both from Trump appointees.

The tussle saw Powell make rare political statements during the press conference. He advised the Fed chair set to replace him to stay out of elected politics and engage with Congress members on both sides of the aisle. Powell’s tenure is set to end later this year, unless Trump follows through with his wild threats and fires the independent institution’s head.

Powell also confirmed he will attend the hearing for the legal case against Fed Governor Lisa Cook, calling it “the most important legal case in the Fed’s 113-year history.” The Supreme Court will decide whether Trump can fire a Fed governor, with the ruling set to have wide implications on the Fed’s independence.

What’s next? Markets are pricing in two rate cuts this year starting in July, which means the two remaining meetings in Powell’s term are expected to stay the course.

MARKETS THIS MORNING-

Asia’s stock markets are trading mixed this morning. Shanghai Composite is staying marginally in the green, while Japan’s Nikkei and Hong Kong’s Hang Seng are slightly inching down. Meanwhile, Wall Street futures are in the red following a sharp rise in spot gold prices over the USD 5.5k mark.

ADX

10,394

+0.4% (YTD: +4%)

DFM

6,514

+0.8% (YTD: +7.7%)

Nasdaq Dubai UAE20

5,286

+1% (YTD: +8.1%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

3.6% o/n

3.6% 1 yr

TASI

11,458

+0.7% (YTD: +9.2%)

EGX30

47,786

-0.1% (YTD: +14.24%)

S&P 500

6,979

+0.4% (YTD: +1.9%)

FTSE 100

10,154

-0.5% (YTD: +2.4%)

Euro Stoxx 50

5,933

-1.0% (YTD: +2.5%)

Brent crude

USD 68.91

+0.8%

Natural gas (Nymex)

USD 3.76

+0.8%

Gold

USD 5,552.00

+4.0%

BTC

USD 88,085.71

-1.2% (YTD: +0.3%)

Chimera JP Morgan UAE Bond UCITS ETF

AED 3.75

-1.3% (YTD: 0.0%)

S&P MENA Bond & Sukuk

151.61

-0.1% (YTD: +8.0%)

VIX (Volatility Index)

USD 16.35

0.0% (YTD: +9.4%)

THE CLOSING BELL-

The DFM rose 0.8% yesterday on turnover of AED 992.9 mn. The index is up 7.7% YTD.

In the green: Amcreit (+14.9%), Sukoon Takaful (+11.2%), and Dubai Residential REIT (+3.1%).

In the red: Dubai Islamic Ins. and Reins. (-5.3%), Alec Holdings (-2.5%), and Al Firdous Holdings (-2.2%).

Over on the ADX, the index rose 0.4% YTD on turnover of AED 1.7 bn. Meanwhile, Nasdaq Dubai was up 1%.

Tags: