Powell's "wait-and-see" approach fails to ease market differences on Wall Street debates whether to cut interest rates twice or zero times.

The Federal Reserve on Wednesday kept interest rates unchanged, with policymakers suggesting they may still cut rates later this year. However, due to the expected increase in inflation from the Trump administration's tariff plans, the overall pace of future rate cuts has slowed. In the latest economic forecast, officials outlined a picture of moderate stagflation in the U.S.: economic growth slowing to 1.4% this year, unemployment rising to 4.5% by year-end, and inflation settling at 3% in 2025, significantly higher than current levels. The dot plot shows disagreements within the committee, with market analysts also offering differing views. While policymakers still expect a 50-basis-point rate cut this year (consistent with forecasts from March and December), they have slightly slowed the pace in their prolonged battle to bring inflation back to the 2% targetforecasting 25-basis-point rate cuts in 2026 and 2027. In terms of market reaction, the stock market briefly expanded gains before retreating, with the S&P 500 index ultimately rising by 0.03%. In the bond market, the yield on the 10-year U.S. Treasury narrowed by 1.2 basis points to 4.379%, while the 2-year U.S. Treasury yield fell by 1.9 basis points to 3.914%. In the forex market, the U.S. dollar index initially dropped before rebounding, rising by 0.21% to 99.07 at the time of publication, while the euro fell by 0.25% against the U.S. dollar to 1.1454. Analysts have also offered their views on this development: Sahak Manuelian, Managing Director of Global Equity Trading at Wedbush Securities: "The policy statement is consistent with previous signals. Inflation is still high, but the impact of tariffs in the coming months will be a variable. Powell stated that if not for the tariff factor, the Fed would have cut rates by now. It's not surprising that the market pulled back before the close." R. Burns McKinney, Portfolio Manager at NFJ Investment Group: "Investors were already expecting rates to remain unchanged, but the focus was on the Fed's forecast for rate cuts before year-end. The dot plot previously forecasted two rate cuts, and investors were concerned it might be reduced to one, but Powell's team has maintained the expectation for two rate cuts, which aligns with market expectations." Nate Kush, Portfolio Manager at Neuberger Berman: "The Fed's rate decision and outlook suggest that the impact on growth and inflation might not be as severe as feared after April's 'day of liberation.' The Fed also seems to agree with my view that even though the impact of inflation hasn't fully materialized, the inflation shock may be temporary and manageable." Despite acknowledging heightened geopolitical risks, macro risks have diminished, as evidenced by improved financial conditions and narrowing credit spreads. Following uncertainty caused by the April tariffs, we increased credit risk assets in our portfolio, such as high-yield bonds, despite recent market rebounds. We believe maintaining this overweight position is rational." Andrew Wells, Chief Investment Officer at SanjacAlpha: "We immediately saw this as a hawkish signal. Although the median in the dot plot remained unchanged, a deeper look reveals that more Fed officials are leaning towards not cutting rates this year, with the number expecting one... (JCGO)