Key takeaways

• As expected, the FOMC decided to keep the federal funds target range steady at 3.50-3.75% in January, following a sequence of rate cuts at the September, October and December policy meetings last year.
• While the Fed didn’t ease at this meeting, the 10-2 vote split, with two FOMC voters favouring a 0.25% rate cut, indicates a modest bias towards less restrictive rate policy within the Fed. Although the latest FOMC dot plot implies roughly one 0.25% cut in 2026 and another in 2027, we maintain our view that there will be no further rate cuts through 2026 and 2027, with double-sided risks to this outlook as the economy evolves. Chair Powell noted that the growth outlook has improved since the last FOMC meeting and reiterated that inflation remains above the Fed’s target, with tariffs likely to result in a one-time price increase.
• We continue to overweight investment grade credit, where we still see opportunities for investors to capture solid yields. For equity investors, robust economic growth and strong corporate earnings continue to be supportive. Combined with the ongoing tech revolution led by AI, this backdrop underpins our bullish view on global equities, with an overweight stance on US stocks. We expect the USD to remain under selling pressure in the coming weeks, mostly on structural concerns.

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/policy-on-hold-as-the-fed-signals-patience/