Market reaction after Fed keeps key interest rate unchanged

On June 18, the Fed decided to keep the benchmark interest rate at 4.25-4.50%, this latest move will likely anger the 47th owner of the White House, who has repeatedly pressured the Fed to lower interest rates.

Headquarters of the US Federal Reserve (Fed) in Washington, DC. (Photo: THX/TTXVN)

On June 18, the US Federal Reserve (Fed) decided to keep its benchmark interest rate unchanged at 4.25-4.50%, the level it has maintained since December 2024, while forecasting higher inflation and slower growth in 2025 amid President Donald Trump's tariff policies taking effect and looming geopolitical uncertainty.

According to a VNA correspondent in Washington, the Fed kept its benchmark lending rate unchanged in the range of 4.25-4.50% at the end of a two-day meeting of the Federal Open Market Committee (FOMC), the Fed's policy-making body, with officials expecting two rate cuts this year, similar to previous forecasts.

In a statement released after the meeting, the Fed said "uncertainties about the economic outlook have declined but remain high."

The agency cut its expectations for economic growth this year, while raising its forecasts for inflation and unemployment in updated forecasts.

Fed officials highlighted the overall health of the US economy, with inflation falling in recent months along with a steadily low unemployment rate.

The US unemployment rate has remained at 4.2% for the last three censuses, with about 7 million unemployed in a US workforce of about 170 million. Inflation picked up slightly, with the consumer price index (CPI) in May 2025 rising to 2.4%, up from 2.3% in April 2025.

The personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, fell to 2.1% in April 2025, close to the Fed's 2% target.

The Fed's rate decision was in line with analysts' forecasts. Observers largely expect policymakers to take a cautious approach this year as they monitor the impact of President Trump's tariff policies on the world's largest economy.

Although economists have warned that the across-the-board tariffs, which have raised overall U.S. tariffs to their highest level in nearly 100 years, could fuel inflation and weigh on growth, so far they have not caused widespread price spikes.

The Fed's latest move is likely to anger the 47th White House boss, who has repeatedly pressured the Fed to lower interest rates.

Market reaction

The three major US stock indexes rose in a volatile trading session on June 18, after the US Federal Reserve (Fed) decided to keep interest rates unchanged.

The Fed also signaled that borrowing costs are likely to continue falling this year, but it revised down its expected pace of future rate cuts.

Traders at the New York Stock Exchange, USA. (Photo: THX/TTXVN)

According to the Fed statement, policymakers still expect to cut interest rates by half a percentage point this year, then ease the pace of cuts slightly to just one quarter-point cut each in 2026 and 2027. Policymakers also estimate that President Donald Trump's tariffs will boost inflation.

The indexes rose immediately after the Fed's announcement but quickly returned to their pre-news levels. At around 1:14 a.m. on June 19, Vietnam time, the Dow Jones Industrial Average rose 124.01 points, or 0.29 percent, to 42,339.81. The S&P 500 gained 17.02 points, or 0.28 percent, to 5,999.74, and the Nasdaq Composite added 71.45 points, or 0.37 percent, to 19,592.54.

Peter Cardillo, chief market economist at Spartan Capital Securities, said the Fed saw slowing economic growth and decided to keep interest rates unchanged. This did not surprise the market.

Investors are also keeping a close eye on developments in the Middle East, with some concerned about the possibility of more direct US military involvement in the Israeli-Iranian airstrikes. Iran’s Supreme Leader Ayatollah Ali Khamenei has rejected Trump’s demand for unconditional surrender. President Trump has said his patience is running out, though he has not hinted at his next move.

Earlier in the day, data showed initial jobless claims in the United States fell last week, but remained at levels that suggested the labor market could continue to lose momentum in June 2025.

The world gold market also increased slightly after the Fed decided to keep interest rates unchanged, while platinum prices made a strong impression when they skyrocketed to their highest level in more than four years.

Specifically, spot gold prices increased by 0.1% to $3,392.08/ounce. US gold futures prices also recorded a slight increase of 0.2% to $3,412.5/ounce.

Gold’s appeal is often bolstered by geopolitical tensions and a low-interest-rate environment, but the precious metal’s rally has stalled after hitting a session high of $3,451.04 an ounce on June 16, approaching its all-time high set in April 2025.

In a recent report, Goldman Sachs bank stated that investors' interest is shifting to other precious metals as they look for opportunities to "catch up" on growth potential.

In other precious metals, spot silver fell 0.8% to $36.95 an ounce after hitting its highest since February 2012 earlier. Platinum rose 5.1% to $1,327.03 an ounce, its highest since February 2021./.

According to VNA

Source: https://baothanhhoa.vn/phan-ung-cua-thi-truong-sau-khi-fed-tiep-tuc-giu-nguyen-lai-suat-co-ban-252608.htm