The Federal Reserve has decided to keep interest rates steady within the range of 4.25% to 4.5%, while forecasting two potential rate cuts for 2025. The central bank’s decision comes as the U.S. economy remains strong overall, with solid labor market conditions and inflation moving closer to the Fed’s 2% long-term goal. Federal Reserve Chair Jerome Powell addressed the decision during a press conference, stating, “The economy is strong overall and has made significant progress toward our goals over the past two years.
Labor market conditions are solid, and inflation has moved closer to our 2% longer-run goal, though it remains somewhat elevated.”
Traders responded positively to the Fed’s outlook for rate cuts later this year, with the Dow Jones Industrial Average climbing 383.32 points, or 0.92%, to close at 41,964.63. The S&P 500 jumped 1.08%, finishing at 5,675.29, and the Nasdaq Composite advanced 1.41%, settling at 17,750.79. Michael Green, chief strategist at Simplify Asset Management, noted that the information was largely in line with expectations.
“The most important aspect is that the information was more or less in line with expectations. We’ve experienced weaker-than-expected inflation during the summer over the past two years, and higher-than-expected inflation during the winter and spring periods.
Fed holds rates, stocks surge
This indicates residual seasonality that needs better capture,” Green said. The Fed’s decision comes amid rising trade tensions between the U.S. and key partners, with President Donald Trump recently imposing tariffs on goods from Canada, Mexico, and China, prompting retaliatory duties. Jeffrey Roach, chief economist at LPL, cautioned that stagflation concerns might grow as the Fed navigates a “policy fog” ahead of tariff impacts.
“As growth prospects weaken and inflation remains sticky, the threat of stagflation increases,” Roach said, anticipating that core inflation will decline by the summer, allowing for rate cuts at the Fed’s June meeting. In other market news, shares of liquified natural gas producer Venture Global rose nearly 2% after the Department of Energy approved LNG exports from the company’s CP2 LNG terminal in Louisiana. This approval is part of the administration’s effort to boost U.S. LNG exports under President Trump’s “energy dominance” agenda.
Despite this uptick, Venture Global has faced challenges, with its stock falling 56% since January 24. The stock market’s positive response to the Federal Reserve’s decisions highlights investor optimism about the economy’s resilience and the anticipated future rate cuts. Despite some ongoing trade tensions and economic uncertainties, key sectors continue to demonstrate strength, underscoring the market’s robust performance.
