Fed stays the course on its wait-and-see approach amid rising economic uncertainty

The US Federal Reserve held its benchmark rates unchanged at 4.25-4.50% for the fourth straight meeting, it said in a statement(pdf). Solid market conditions, low levels of unemployment, and a solid pace of economic growth, were cited as reasons in a statement, which noted inflation is still “somewhat elevated.” The last time the Fed cut interest rates was in December, when it cut rates by 25 bps.

Incoming economic uncertainty? Persistent concerns about an incoming uptick in inflation and unemployment on the back of US President Donald Trump’s tariff agenda, the effects of which are expected to be felt soon, are also factors in the decision, according to statements from Fed Chair Jerome Powell cited by Reuters. Economic projections released alongside the decision show the Fed now expects weaker economic growth — downgraded to 1.4%, from 1.7% earlier — and higher unemployment.

As expected: A Reuters poll from 105 economists had seen all but two predict the Fed to leave interest rates where they have been since the start of the year. Recent labor statistics from the US Treasury also made the case for keeping benchmark rates unchanged, as officials stay the course on a “wait-and-see approach [that] has served them well up until this point,” Deutsche Bank AG economist Brett Ryan told Bloomberg.

Market reax: The S&P 500 fell following the Fed’s announcement, while the Nasdaq inched up 0.1%. Meanwhile, the yield on the 10-year US Treasury note ended the day nearly flat.

Someone won’t be happy: US President Donald Trump has openly called on the Fed to slash rates by a full percentage point. This time he’s been complaining of the cost of high interest rates on fiscal buffers as the US government faces refinancing a huge swathe of maturing debt, Bloomberg reported earlier this week. Treasury stats showed the government paid USD 776 bn over the past eight months in interest fees for its debt.

Most Fed policymakers still expect two rate cuts this year, though division is rising as a minority see no rate cuts needed this year, while others see a need for more than two. Powell downplayed this to say “no one holds these rate paths with a lot of conviction.”

MARKETS THIS MORNING-

Asian markets are in the red following the Fed’s move, with Japan’s Nikkei leading losses at 0.7%, South Korea’s Kospi falling around 0.3%, and Hong Kong’s Hang Seng losing nearly 0.5%. Over on Wall Street, futures also point to a weaker open.

THE CLOSING BELL-

The ADX fell 0.4% yesterday on turnover of AED 1.3 bn. The index is up 0.8% YTD.

In the green: GFH Financial Group (+9.2%), E7 Group PJSC Warrants (+7.5%) and Presight AI Holding (+4.2%).

In the red: Abu Dhabi National Co. for Building Materials (-9.4%), Al Khaleej Investment (-8.3%) and Sharjah Cement and Industrial Development (-4.4%).

Over on the DFM, the index fell 1.2% on turnover of AED 624.1 mn. Meanwhile, Nasdaq Dubai was down 0.9%.

CORPORATE ACTIONS-

Agility Public Warehousing Company’s stake in Agility Global will be reduced to 25% following a share buyback program, a distribution of 20% of shares in Agility Global as in-kind dividends, according to a bourse disclosure (pdf). The company also approved an additional USD 110 mn loan from a subsidiary to Agility Public Warehousing Company, which will settle the loan partially when Agility Global buys 615 mn shares (5.9% of share capital) at AED 0.5-5 per share from an APWC subsidiary. The ADX had earlier approved a share repurchase program of up to 1.04 bn shares of its ADX-listed shares, which is set to begin on 26 June, according to a separate ADX disclosure (pdf).