[New York Stock Market] US Fed Maintains Rate Cut Outlook This Year, Nasdaq Rises 1.41%...

Fed Keeps Benchmark Rate at 4.25~4.5% per Annum
Maintains Forecast of Two Rate Cuts This Year
Powell: "Tariff-Driven Inflation Is Temporary... Risk of Recession Is Low"

The three major indices of the U.S. New York Stock Exchange all closed higher on the 19th (local time). The market was relieved as the Federal Reserve (Fed) kept the benchmark interest rate unchanged as expected and maintained the forecast for two rate cuts this year. Dovish remarks by Fed Chair Jerome Powell, stating that tariff-driven inflation is temporary and the risk of recession is low, also stimulated buying.

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On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average (Dow) closed at 41,964.63, up 383.32 points (0.92%) from the previous trading day. The large-cap-focused S&P 500 rose 60.63 points (1.08%) to 5,675.29, and the tech-heavy Nasdaq jumped 246.67 points (1.41%) to close at 17,750.79.

Investors' attention was focused on the Federal Open Market Committee (FOMC) regular meeting held that afternoon. The Fed decided to keep the federal funds rate at 4.25?4.5% per annum, maintaining the freeze for the second consecutive time since January. Although the inflation forecast for this year was raised, the growth outlook was lowered, keeping the expected number of rate cuts this year at two times of 0.25 percentage points each (a total of 0.5 percentage points cut), unchanged from before. According to the updated Fed Summary of Economic Projections (SEP), the GDP growth forecast for this year was revised down from 2.1% to 1.7%, and the year-end unemployment rate forecast was adjusted from 4.3% to 4.4%. Inflation was raised from 2.5% to 2.8% based on the core Personal Consumption Expenditures (PCE) price index, which the Fed prioritizes most.

Concerns about stagflation (rising prices amid economic slowdown) due to President Donald Trump's tariff policies were partially reflected in the Fed's economic outlook, but the market paid more attention to Powell's dovish press conference than expected. At the press conference immediately following the FOMC meeting, Chair Powell stated that the impact of President Trump's tariff policies on inflation is "transitory," which is "our baseline scenario." He said, "If inflation is transitory and can quickly disappear without our actions, it may be appropriate to just wait and see," adding, "The same could apply to tariff inflation." This suggested that even if prices rise amid growing concerns over tariff uncertainties, it would be a one-time event with limited impact. He also drew a line under recession fears, saying, "The risk of recession has also increased but is not high," and "We are in a good position to cut or maintain rates." However, he mentioned the potential economic impact of policy uncertainty in Trump's second term, saying, "Inflation has partially started to rise due to tariff responses, and further progress may be delayed throughout this year."

Additionally, the Fed's plan to slow the pace of quantitative tightening announced that day also stimulated investor sentiment. The Fed is currently conducting quantitative tightening by not reinvesting up to $25 billion of maturing Treasury securities each month, but starting next month, it will reduce the monthly cap on Treasury quantitative tightening to $5 billion.

Jamie Cox, Managing Partner at Harris Financial Group, said, "By taking measures to slow the pace of Treasury holdings reduction today, the Fed has indirectly cut interest rates," adding, "This opens the door for the Fed to eliminate reductions by summer, and if lucky, inflation data could come out that leads to a federal funds rate cut."

Bond yields are declining. The 10-year U.S. Treasury yield, a global bond yield benchmark, fell 3 basis points (1 bp = 0.01 percentage points) from the previous trading day to 4.24%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, dropped 6 basis points to 3.97%.

By stock, Nvidia rose 1.81%. On that day, UBS added Nvidia to its global top picks, evaluating that "demand for artificial intelligence (AI) computing performance is structurally sustained, and Nvidia is well positioned." Apple and Microsoft (MS) also rose 1.2% and 1.12%, respectively. Boeing, the U.S. aircraft manufacturer, rose 6.84% following comments from Chief Financial Officer Brian West that cash burn has eased this quarter and factory operations have improved.