Stock market drifts higher as investors await Federal Reserve decision on interest rates
The Federal Reserve’s Latest Policy Decision: What to Expect
The Federal Reserve is set to announce its latest policy statement today at 2 p.m. EST, and financial markets are eagerly awaiting the outcome. Wall Street forecasters overwhelmingly expect the U.S. central bank to leave its benchmark interest rate unchanged, as Fed Chair Jerome Powell has signaled that policymakers are in no rush to lower borrowing costs for consumers and businesses.
In the lead-up to the Fed’s decision, stocks edged up in morning trade, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all posting gains. However, the looming trade war between the U.S. and its key trading partners remains a pressing concern. President Trump’s tariffs on countries like Canada, China, Mexico, and Europe have yet to significantly impact the U.S. economy, but experts warn of the potential for inflation and slowed growth, a combination known as “stagflation.”
Despite signs of economic weakening, most Wall Street economists do not anticipate a recession in the near future. Some experts even believe that stocks are likely to strengthen in the coming months, although volatility may persist due to market turbulence caused by trade uncertainties. Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management, projects that the S&P 500 could reach 6,600 by year-end, driven by Fed easing, economic growth, and AI spending.
John Canavan, lead analyst at Oxford Economics, has cautioned investors against becoming overly pessimistic, noting that while he does not foresee a recession, economic growth may slow and the economy remains vulnerable. The impact of tariffs and the overall health of the economy will play a crucial role in shaping the Fed’s decision on interest rates. Policymakers must navigate a delicate balance, weighing the benefits of easing borrowing costs to support growth against the risks of sparking inflation.
Investors are speculating that the Fed could lower the federal funds rate three times this year, totaling three-quarters of a percentage point, according to Pantheon Macroeconomics. However, with economic uncertainty high and confidence shaken, the Federal Open Market Committee is expected to keep its options open.
As analysts and investors await the Fed’s decision, the broader economic landscape remains uncertain. The outcome of today’s policy statement will provide insights into the Fed’s approach to monetary policy amidst global economic challenges. Stay tuned for updates as the Fed’s decision is announced later today.
Written by Alain Sherter, Senior Managing Editor at CBS News.
