ASX set to fall as Wall Street dips; Fed keeps rates on hold, says future is ‘foggy'
US stocks drifted to a mixed finish after the Federal Reserve indicated it may cut interest rates twice this year, though it's far from certain about that.
The S&P 500 finished nearly unchanged and edged down by less than 0.1 per cent after flipping between modest gains and losses several times. The Dow Jones dipped 44 points, or 0.1 per cent, and the Nasdaq composite rose 0.1 per cent.
The Australian sharemarket is set to retreat, with futures at 6.37am AEST pointing to a loss of 28 points or 0.3 per cent, at the open. The ASX lost 0.1 per cent on Wednesday. The Australian is stronger. It was 0.5 per cent higher to 65.09 US cents at 6.50am AEST. Unemployment figures will be released at 11.30am AEST.
Treasury yields also wavered but ultimately held relatively steady after the Fed released a set of projections showing the median official expects to cut the federal funds rate twice by the end of 2025. That's the same number they were projecting three months ago, and it helped calm worries a bit that inflation caused by President Donald Trump's tariffs could tie the Fed's hands.
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Cuts in rates would 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 likewise 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 warning it may take months to feel the effects of tariffs. And inflation has been feeling upward pressure recently from a spurt in oil prices because of Israel's fighting with Iran.
Fed Chair Jerome Powell stressed on Wednesday that all the uncertainty surrounding tariffs means the median forecast for two cuts to interest rates this year could end up being far from reality. 'Right now it's just a forecast in a very foggy time,' he said
Fed officials are waiting to see how big Trump's tariffs will ultimately be, what they will affect and whether they will drive a one-time increase to inflation or something more dangerous. There is also still deep uncertainty about how much tariffs will grind down on the economy's growth.
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