Right now, I’m paying close attention to the Federal Open Market Committee’s decisions, and you should too!
Why?
Because when you trade or invest, policy rates directly affect the markets.
And that means your results too.
The idea isn’t to react impulsively to every announcement. It’s to understand what’s happening and factor it into your decisions.
What did the FOMC decide?
At its meetings on 18 and 19 March, the FOMC decided to leave its policy interest rate unchanged.
It stays at 4.5% for now.
The US Federal Reserve had forecast inflation of 2.5% for 2025.
But with Donald Trump’s latest tariff decisions and the resulting price increases, that forecast has risen to 2.7%.
We’re looking at two different approaches:
- Trump wants the Fed to cut rates to support the economy
- The Fed prefers to keep rates where they are to bring inflation down
During his campaign, Trump said the Fed would move in the markets’ favour.
For now, that isn’t happening. The Fed remains cautious, especially given the economic situation.
One more thing: the Fed will also slow the reduction of its balance sheet, known as quantitative tightening.
For Treasuries, that will fall from $25 billion to $5 billion a month.
You could read this as an attempt to avoid slowing the economy too much while keeping moderate pressure on inflation.
How did the market react?
The market took the news well.
The S&P 500 gained 1.07%, the Nasdaq 1.4% and the Dow Jones around 1.0%.
The dollar edged higher after the announcement.
So, no real surprise, and more of a relief for markets.
Worth keeping in mind: other factors may also have contributed to those moves, but the Fed’s decision remains an important one.
What next?
The next FOMC meeting is on 6 and 7 May 2025.
Until then, I’ll keep watching Trump’s announcements, because a single decision of his can change everything.
P.S. The man in the cover image is Jerome Powell, the Fed chair.
He leads the Fed and announces its decisions.
Sources:
- Image 1: Trading Economics
- Image 2: Google Finance