[New York Stocks] Mixed Close in Narrow Range as Fed Holds Rates Steady as Expected... Dow Down 0.1%

Fed Keeps Benchmark Rate at 4.25-4.5% per Year
Lowers Growth Outlook, Raises Inflation Forecast
Maintains Projection for Two Rate Cuts This Year
Trump Says "Iran Wants Negotiations"... International Oil Prices Rise

The three major indices on the New York Stock Exchange ended mixed in a narrow range on June 18 (local time). On this day, the US Federal Reserve (Fed) kept its benchmark interest rate unchanged as expected and maintained its projection for two rate cuts this year, leaving the market without a clear direction. However, after Fed Chair Jerome Powell warned of the possibility of tariff-driven inflation, the S&P 500 index gave up its earlier gains and closed lower.

Reuters Yonhap News

On the New York Stock Exchange that day, the blue-chip Dow Jones Industrial Average closed at 42,171.66, down 44.14 points (0.1%) from the previous session. The large-cap S&P 500 index fell by 1.85 points (0.03%) to 5,980.87, while the tech-heavy Nasdaq index rose by 25.18 points (0.13%) to close at 19,546.27.

Investors focused on the results of the Federal Open Market Committee (FOMC) regular meeting. The Fed announced that it had unanimously decided to keep the federal funds rate at 4.25% to 4.5% per year. Regarding the outlook for the benchmark rate, the Fed maintained its projection for two rate cuts this year. In the newly released dot plot, the median year-end rate forecast remained at 3.9%, unchanged from before. This implies that the current rate of 4.25% to 4.5% could be cut twice by 0.25 percentage points each. However, the median year-end rate forecasts for 2026 and 2027 were raised to 3.6% and 3.4%, respectively, up from 3.4% and 3.1% in March. This suggests that there may be only one rate cut each in the next two years.

As shown by the adjustment in the outlook for rate cuts after next year, the Fed indicated in the Summary of Economic Projections (SEP) released at the same time that concerns about stagflation have grown further. The Fed lowered its forecast for US gross domestic product (GDP) growth this year from 1.7% to 1.4%. The forecast for 2026 was cut by 0.2 percentage points to 1.6%, while the 2027 forecast was kept unchanged at 1.8%. The inflation outlook was also raised. For the core personal consumption expenditures (PCE) price index, which the Fed considers most important, this year's forecast was raised from 2.8% to 3.1%. The forecasts for 2026 and 2027 were also raised by 0.2 percentage points and 0.1 percentage points, to 2.4% and 2.1%, respectively. This reflects the Fed's view that inflation may rise and growth may slow due to policies such as President Donald Trump's tariffs.

Chair Powell also warned during a press conference held immediately after the FOMC meeting, stating, "Tariff increases raise prices and put a burden on economic activity," and added, "We need to consider that a significant level of inflation could occur in the coming months." He continued, "Everything about the impact of tariffs?the magnitude, the duration, and the timing of their effects?is highly uncertain," and emphasized, "We are in a good position to wait for more information on future economic developments before adjusting policy." This reaffirmed the Fed's cautious stance on monetary easing.

The market interpreted the Fed's decision to maintain its projection for two rate cuts this year, despite heightened concerns about stagflation, as somewhat mixed signals. As a result, some on Wall Street are predicting that there may be only one rate cut this year. Seema Shah, Global Chief Strategist at Principal Asset Management, said, "The economic outlook remains highly uncertain, so the Fed is likely unable to be confident about future developments," and predicted, "The Fed is expected to keep rates unchanged through the end of the fourth quarter and cut rates only once by 0.25 percentage points this year."

Investors also paid close attention to the ongoing conflict in the Middle East. President Trump, speaking to reporters at the White House, said that Iran had reached out for negotiations, leaving open the possibility of talks by stating, "It's never too late." When asked about the possibility of a direct US attack on Iran, he replied, "It could happen, or it might not." President Trump also revealed that Russian President Vladimir Putin had expressed a willingness to mediate. Trump's remarks have raised optimism that the armed conflict between Iran and Israel, now in its sixth day, could de-escalate.

Zachary Hill, Head of Portfolio Management at Horizon Investments, commented, "The market wants to overlook geopolitical risks," adding, "Historically, that has been the right decision, and it remains a driving force for us today."

International oil prices rose. West Texas Intermediate (WTI) crude closed at $75.14 per barrel, up $0.30 (0.4%) from the previous day. Brent crude, the global oil price benchmark, finished at $76.70 per barrel, up $0.25 (0.3%) from the previous session.

By stock, trading in US Steel was halted as it was fully acquired by Nippon Steel. Tesla rose 1.82%, and Nvidia gained 0.94%. Alphabet, Google's parent company, fell 1.83%. Meta, Facebook's parent company, declined 0.21%.

US Treasury yields were flat. The yield on the 10-year Treasury, the global bond benchmark, stood at 4.39%, while the yield on the 2-year Treasury, which is sensitive to monetary policy, was 3.94%, both unchanged from the previous day.