ASX set to slip, Wall Street drifts; Fed keeps rates on hold, eyes two cuts this year
US stocks are drifting lower after the Federal Reserve indicated it still may cut interest rates twice later this year in moves that would boost the economy.
The S&P 500 was up 0.2 per cent in afternoon trading. The Dow Jones Industrial Average was flat, and the Nasdaq composite was 0.1 per cent higher.
The Australian sharemarket is set to retreat, with futures at 4.55am AEST pointing to a loss of 33 points or 0.4 per cent, at the open. The ASX lost 0.1 per cent on Wednesday.
Treasury yields eased a touch in the bond market after Fed officials released a set of projections showing the median member still expects to cut the federal funds rate twice by the end of 2025. That's the same number as they were projecting three months ago, and it helped calm worries that inflation made possible by President Donald Trump's tariffs and rising oil prices could drive inflation higher and tie the Fed's hands.
At a press conference after the Fed released its latest policy statement, chair Jerome Powell said, 'Increases in tariffs this year are likely to push up prices and weigh on economic activity.' He added, however, that the extent of the impact depends on the size and duration of the tariffs. The 'pause' Trump put in place on many of the tariffs is set to end on July 9, pending any deals the administration strikes with its trading partners.
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'We don't yet know with any confidence where (the tariffs) will settle out,' he said.
Cuts in rates could make mortgages, credit-card payments and other loans cheaper for US households and businesses, which in turn could strengthen the overall economy. But they could also fan inflation higher.
So far, inflation has remained relatively tame, and it's near the Fed's target of 2 per cent. But economists have been saying it may take months to feel the full effects of tariffs. And inflation has already been feeling upward pressure recently from a spurt in prices because of Israel's fighting with Iran.
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