Key takeaways

• In a move largely anticipated by markets and us, the Federal Reserve left interest rates unchanged at 4.25%–4.50%, but the meeting was still seen as slightly hawkish. The Fed noted that economic activity has “moderated” in recent months, while inflation remains elevated but continues to ease.
• Fed Chair Jerome Powell reiterated that the “main number you have to look at now is the unemployment rate,” since labour supply and labour demand appear to be slowing in tandem. Mr. Powell emphasised his data-dependent approach and offered no clear timelines for cuts, signalling the Fed’s intent to keep rates high until inflation convincingly moves toward the 2% target.
• We maintain our overweight on US equities, given the economy’s relative strength to other markets, strong earnings growth, the Fed’s eventual pivot, and the tailwinds from structural themes around technology and AI revolution, the re-industrialisation of the US economy, and reshoring of key industries, which together support a favourable risk-reward outlook. We remain neutral overall on fixed income but continue to tactically add high quality bonds for income and stability, using an active approach to find selective opportunites. We still forecast 0.75% of cumulative Fed rate cuts through this year and next.

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/strong-economy-and-tariff-uncertainty-keep-hawkish-fed-on-hold-again/