Fed Keeps Interest Rates Steady but Floats Two Cuts This Year. Here’s What’s Moving the Most.

US central bank pointed to two trims to borrowing costs in 2025, keeping pace with previous guidance despite Trump’s tariff games and still-elevated inflation.

🛒 Fed Keeps Rates Flat, Projects Rising Inflation

• The Federal Reserve wrapped up its two-day regular meeting on Wednesday, capping the first six months of the year with another expected decision — a hold to interest rates USINTR at 4.5%.
• Fed officials collectively penciled in two trims to borrowing costs over the next six months, during which they'll meet a total of four times. In other words, markets should witness two meetings where central bankers will cut interest rates by at least 25 basis points at each gathering.
• But that was all expected and in line with prior Fed projections. What wasn't priced in was Powell’s presser, which delivered some market-moving announcements (yes, it’s prospects for rising inflation favoring the US dollar).

🎙️ Powell’s Market-Moving “Good Afternoon”

• “Everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs,” Powell said at his press conference.
• “It will be someone in that chain that I mentioned, between the manufacturer, the exporter, the importer, the retailer, ultimately somebody putting it into a good of some kind or just the consumer buying it.”
• “All through that chain, people will be trying not to be the ones who can take up the cost but ultimately, the cost of the tariff has to be paid. And some of it will fall on the end consumer.”

💸 Dollar Gains, All Else Fades

• Naturally, the US dollar moved higher against rival currencies. The EURUSD drifted further away from its three-year high of $1.16 and languished near $1.1450. The GBPUSD was floating near $1.34, looking to log its second straight day of declines.
• Gold prices XAUUSD forgot about the Iran-Israel conflict and took a trip South, dipping nearly 0.6% to $3,370 per ounce. Bitcoin BTCUSD, that volatile beast, was off by 0.8% to $104,000 as the prospects of higher rates for longer dented the outlook for more risk capital poured into crypto markets.
• Stocks broadly erased their modest intraday gains to slide under the flatline with the Nasdaq barely hanging above the water. The S&P 500 and the Dow Jones surrendered to the selling pressure, wiping out 0.1% and 0.2%, respectively, shortly before the closing bell. And that’s a wrap: another one of Powell’s “Good afternoons” that ends up sloshing billions around.