Can FED’s Powell Offer Relief to S&P 500 and Struggling US Stock Markets?
Today US stock markets such as S&P 500 are looking at the FED for some relief after tumbling 10%.
All Eyes on the Fed’s Policy Announcement for Clues
The Federal Reserve is set to deliver its latest policy decision later today, with markets closely watching for clues about the future path of interest rates. The FOMC has kept rates steady at 4.50% during the last two meetings, and no changes are expected this time either. Instead, investor focus will be on the Dot Plot, updated economic projections, and Jerome Powell’s press conference, which could offer signals about the Fed’s stance on future rate cuts.
While the US economy had been growing at a solid pace in early 2025, recent data suggests a slight slowdown due to political and economic shifts. Despite this, these adjustments are expected to yield benefits in the long run. However, for now, US stock markets remain under pressure, with all three major indices—the Dow Jones, S&P 500, and Nasdaq—down roughly 10% from their highs.
Tariffs and Inflation: A Balancing Act
A key concern for policymakers is the impact of tariffs on inflation. While tariffs on final goods may result in a one-time price surge, duties on intermediate goods pose the risk of continuously fueling inflation as long as they remain in effect. Last week’s CPI and PPI inflation data indicated a decline for February, but it remains uncertain how prices will behave in the coming months.
A month ago, Fed Funds futures were pricing in rate cuts of around 50 basis points by the end of 2025. Today, expectations have nearly doubled, with markets pricing in 83 basis points of easing. Many anticipate the Fed will lower growth projections while possibly raising inflation forecasts, which presents a double-edged sword for the economy. Slower growth would typically warrant a more dovish Fed, but higher inflation could force the central bank to maintain a hawkish stance for longer.
How Will Powell’s Tone Impact Stock Markets?
Most analysts expect the Fed to keep rates unchanged at today’s meeting. Powell is likely to reiterate a cautious stance on rate cuts, emphasizing the need for patience before making any policy adjustments. However, if Powell fails to reaffirm that the Fed is in no hurry to cut rates, markets may interpret this as a hawkish shift, which could send stocks lower.
On the other hand, if Powell moves away from the “wait-and-see” approach, it would be viewed as a dovish signal, which could boost risk sentiment and help stabilize stock markets after their sharp decline in 2025.
The Fed’s message today will be crucial in determining whether the recent sell-off in equities continues or if relief is finally on the horizon. Traders will be closely watching Powell’s every word for hints on the Fed’s next moves.
S&P 500 Live Chart
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