The market reaction after the Fed decision was lukewarm!

The Fed raised its policy rate by 25 basis points to a range of 5.25% to 5.5% in the early hours of Thursday morning, and the policy statement left the door open for another rate hike in September. But given that Fed Chairman Jerome Powell still said that every interest rate decision will be reassessed, there is still a lack of firm commitment to further tightening. Given the Fed’s data-dependent stance and the broader trend of slowing U.S. inflation, Fed rates are expected to remain firm for the rest of the year.

It may be worth watching that the Fed chair still sees inflation not returning to its 2% inflation target until 2025, a possible sign that Powell expects a more arduous process of depressing price pressures going forward. The recent weakening of the base effect and the strengthening of commodity prices may present some potential challenges.

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