United States equity markets ended Wednesday’s session mixed (Thursday AEST), as investors digested Federal Reserve Chair Jerome Powell’s remarks indicating the central bank is in no rush to lower interest rates.
The Fed held its benchmark rate steady, while assessing the inflationary impact of President Donald Trump’s recent tariff hikes.
The Dow Jones Industrial Average slipped 171.7 points, or 0.4%, to close at 44,461.3. The S&P 500 edged down 8 points, or 0.1%, to 6,362.9. In contrast, the Nasdaq Composite rose 31.4 points, or 0.2%, finishing at 21,129.7.
Powell offered no firm guidance, saying the central bank has “made no decisions” regarding a rate change.
“Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem,” Powell said.
He noted that “higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen.”
Powell added that a “reasonable base case” could be that the inflationary effects of tariffs are “short lived”, but also warned that they could result in “more persistent” changes to price levels.
“For the time being, we’re well positioned to learn more about the likely course of the economy and the evolving balance of risks before adjusting our policy stance,” Powell said. “We see our current policy stance as appropriate to guard against inflation risks.”
The Fed’s decision to leave rates unchanged was not unanimous. Governors Michelle Bowman and Christopher Waller dissented, preferring a 25-basis-point cut at the meeting.
Equities initially reacted positively, buoyed by a better-than-expected gross domestic product (GDP), reporting growth of 3% in the second quarter of 2025, ahead of the 2.4% expected, suggesting the economy is absorbing the impact of higher tariffs.
On the bond markets, Treasury yields jumped in response to Powell’s tone. The yield on the 10-year note rose 1.1% to 4.372%, while the 2-year yield climbed 1.9% to 3.943%.
