The U.S. Federal Reserve concluded its meeting exactly as market watchers had expected: by keeping interest rates steady. While a cut might have been a pleasant surprise to some — as lower interest rates generally support the economy and stock market — it could also have intensified investors’ worries that the economy is headed south.
It was the Fed’s dot plot, or a projection of where central bankers think interest rates will end up in the upcoming years, that provided the balm. Going into the meeting, some investors were concerned that the Fed may refrain from cutting interest rates this year given the uncertain effects on inflation by U.S. President Donald Trump’s tariffs.
But the Fed decided to retain its estimated two cuts for 2025, which helped the stock market bounce. In these volatile times, acting as anticipated, and reinforcing expectations when doubts creep in can have a more decisive impact than any surprise stimulus measures.
What you need to know today
Fed held rates, sees two cuts this year
The U.S. Federal Reserve on Wednesday decided to keep its key borrowing rate between 4.25%-4.5%, as expected by markets. Central bankers indicated they still see half a percentage point of rate cuts, which typically means two reductions, this year. The Fed also lowered its projection for U.S. economic growth in 2025 to 1.7% from 2.1% in December, while raising its inflation outlook to 2.8% from 2.5%. Fed Chair Jerome Powell at his press conference pointed out risks from tariffs, but said they could be “transitory.”
Prospective rate cuts help stocks rally
U.S. markets rallied Wednesday as market participants cheered the Fed’s decision to retain its forecast of two rate cuts this year. The S&P 500 climbed 1.08%, the Dow Jones Industrial Average rose 0.92% and the Nasdaq Composite jumped 1.41%. The regional Stoxx 600 in Europe added 0.19%. Turkey’s benchmark stock index plunged 8.72% following the surprise arrest of Istanbul mayor Ekrem Imamoglu, a leading opposition party figure, on charges he denies.
Economic growth ‘better than people think’
Bank of America CEO Brian Moynihan told CNBC Wednesday that even though “the consumer is saying, ‘I’m getting more pessimistic,’ in some of the surveys and things like that,” shoppers are still continuing to spend, “which means the economy ought to be holding up better than people think.” That means gross domestic product this year could still grow around 2%, rather than the nearly 3% of 2024 and 2023.
Google and Apple on EU’s radar
The European Commission, the executive body of the EU, said Wednesday that it found Google-parent Alphabet’s Search and Google Play products in breach of the Digital Markets Act, a law aimed at tackling tech competition issues. Separately, the Commission also sent guidance to Apple under the DMA, calling for the iPhone maker to take concrete steps to comply with its interoperability obligation under EU competition rules.
Tencent nearly doubled fourth-quarter profits
Tencent posted fourth-quarter revenue of 172.4 billion Chinese yuan ($23.9 billion), which beat expectations compiled by LSEG and was 11% higher year on year. The Chinese tech giant’s profit came in at 51.3 billion yuan, higher than the 46.03 billion yuan expected and surging 90% from the same period in 2023. AI cloud revenue approximately doubled year on year in 2024, Tencent said, though it declined to give a specific sales number.
[PRO] Wall Street heard one message from Fed
The Fed discussed a range of topics at its meeting and press conference, such as projections of interest rates, inflation and gross domestic product this year, as well as the potential impacts of U.S. President Donald Trump’s tariffs. But Wall Street seemed to hear just one message — and it helped stocks bounce Wednesday.
And finally…
The Chinese national flag fluttering with the Lujiazui Financial District in the background.
China markets are set to outperform Wall Street as U.S. exceptionalism comes to a pause
Last week, the S&P 500 slipped into correction territory for the first time since 2023. By contrast, the MSCI China index has gained 19% since the start of the year to Mar. 9, according to Goldman Sachs, marking its best start to a year in history.
The contrasting fortunes mark a swift turnaround from just a few months ago when many investors believed the U.S. was uniquely positioned to weather economic and political storms buffeting other countries. Chinese stocks were also languishing due to regulatory worries and concerns over the health of the Chinese economy.
“The U.S. has had a good period, and that’s coming to an end because Trump’s policies are very anti-economy. China has had a very bad period, but it looks as if it’s starting to recover,” Richard Harris, CEO of Port Shelter Investment Management, told CNBC.
