As expected, the US Federal Reserve overwhelmingly opted to leave benchmark interest rates unchanged at between 3.5% and 3.75%, with just one member advocating for a cut, according to a statement. The move marks the second decision this year to keep rates as they are, after the Fed opted to hold rates steady in January as the central bank weighed up both strong GDP growth and a soft labor market.

Fed acknowledges “uncertainty” around regional war: The Fed noted that the US/Israel-Iran war in the Middle East had made the situation markedly more uncertain. “The thing I really want to emphasize is that nobody knows,” Fed chair Jerome Powell said after the meeting in reference to the potential effects of the war on the global economy, Bloomberg reports.

The deciding factor, as it always has been, is inflation, but the outlook for that is also uncertain. Powell said that inflation would need to come down, especially for baskets affected by tariff policies, before they could make another rate cut. The Fed also hiked up its inflation forecast to 2.7% for this year, up from a previous 2.4% estimate, according to data released with the decision. Both figures are markedly above its ultimate 2% goal, and its prediction for core categories was also up to 2.7%.

REMEMBER- Analysts, economists, and traders alike have been expecting inflation to spike in case of a prolonged regional war, as oil and gas prices continue to rise amid disruptions in the Strait of Hormuz, which are also impacting shipping, freight, and ins. costs.

What to expect from the Fed next: Back in January, markets had priced in two rate cuts starting in July, after Powell’s tenure as Fed chair comes to an end. Now, bond traders are predicting we won’t see another rate cut at all this year, Bloomberg reported elsewhere. Bond yields in Europe and the US climbed, with those on two-year US Treasuries, usually the most sensitive to expectations for Fed policy, climbing 11 basis points.

Could there be a hike in the cards? Some bond traders are hedging for a potential hike in the coming months, while interest rate futures priced a rate hike by December as 25% likely, a sharp aboutturn from days before when the prospect of a hike was practically a nonstarter. For now, Powell has shrugged off the possibility of a rate hike being its next move, saying that “the vast majority of participants don’t see that as their base case.”

ADX

9,571

+0.2% (YTD: -4.2%)

DFM

5,550

+0.8% (YTD: -8.2%)

Nasdaq Dubai UAE20

4,503

+0.5% (YTD: +7.9%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

3.5% o/n

3.7% 1 yr

TASI

10,946

+0.6% (YTD: +4.3%)

EGX30

47,612

+3.4% (YTD: +13.8%)

S&P 500

6,506

-1.5% (YTD: -5%)

FTSE 100

9,918

-1.4% (YTD: -0.1%)

Euro Stoxx 50

5,501

-2% (YTD: -5%)

Brent crude

USD 112.19

+3.3%

Natural gas (Nymex)

USD 3.1

-2.2%

Gold

USD 4,610

-0.7%

BTC

USD 67,913

-3.4% (YTD: -23.5%)

Chimera JP Morgan UAE Bond UCITS ETF

AED 3.55

-1.9% (YTD: -3.2%)

S&P MENA Bond & Sukuk

149.15

-0.6% (YTD: -1.8%)

VIX (Volatility Index)

26.78

+11.3% (YTD: +79.1%)

THE CLOSING BELL-

The DFM rose 0.8% on Wednesday on turnover of AED 2.4 bn. The index is down 8.2% YTD.

In the green: Amlak Finance (+14.4%), Emaar Development (+6.3%), and Ajman Bank (+5.3%).

In the red: Dubai Refreshment Company (-5.0%), Air Arabia (-4.9%), and Taaleem Holdings (-4.8%).

Over on the ADX, the index rose 0.2% on turnover of AED 3.1 bn. Meanwhile, Nasdaq Dubai was up 0.5%.

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