Key takeaways

• As expected, the Federal Reserve kept the federal funds rate target range unchanged at 4.25%-4.50%. The FOMC continues to try to balance the recent weaker economic data and the rising risk of recession with concerns surrounding tariffs and the potential for an acceleration in inflation.
• Even with a likely deterioration in the future growth-inflation trade-off, we continue to expect three 0.25% rate cuts this year, in June, September and December. However, if the May jobs data don’t show evidence of softening (in the unemployment rate, net employment growth, or both), then the FOMC may keep policy rates unchanged again in June.
• For fixed income investors, despite the potential for some near-term tariff inflation, any back up in market rates continues to provide a tactical opportunity. For US equity investors, the widespread use of tariffs and the potential for accelerating inflation continue to dampen the outlook for corporate profits and economic growth in 2025. The sizable downward revision to corporate profits should incorporate any potential slowdown in economic growth and tighter corporate margins if tariffs are enacted and companies choose to assume part of the increased price levels. Until the tariff policy decisions are finalised, it seems US equities may remain volatile and the outlook for corporate profits uncertain. For now, we remain neutral on US equities.

Please refer to the full report for details about the event and our investment view.

https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/the-fed-remains-on-hold-amid-tariff-uncertainty/