Fed Keeps Rates Unchanged, How Powell’s Remarks Affect US Stocks, Dollar and Gold?

The decision to hold interest rates steady at this meeting was in line with market expectations, but the widening internal voting dissent is noteworthy.

The Federal Reserve statement showed that governors voted 8-4 to maintain interest rates, with Stephen Miran dissenting in favor of a 25-basis-point cut; while the other three dissenters—Beth Hammack, Neel Kashkari, and Lorie Logan—supported the hold, they disagreed with retaining the dovish bias in the statement. This indicates that the internal divide over the future policy path is deepening. Compared to previous periods of greater consensus, a debate has emerged within the Fed over whether to maintain an easing bias.

Records show that the last time four governors dissented was in October 1992; such a divide suggests that Kevin Warsh, who is set to succeed Powell, may face more constraints in setting future interest rates.

Powell's speech also clearly underscored this caution. He stated that while the current policy stance is appropriate, inflation has trended upward, and energy prices will continue to drive headline inflation in the short term. More importantly, he repeatedly emphasized that policy is not on a preset course, and future decisions will be made meeting-by-meeting, based on data, the outlook, and the balance of risks.

At the same time, Powell was not pessimistic in his assessment of the economy in this speech. He noted that the U.S. economy continues to expand at a solid pace, consumer spending remains resilient, and business fixed investment continues to grow rapidly; although the labor market is cooling, the unemployment rate remains around 4.3%, and the slowdown in job growth is more related to changes in labor supply rather than a collapse in demand.

The issue now is that U.S. inflation is proving more stubborn than markets previously expected. Powell mentioned that March headline PCE inflation was approximately 3.5% and core PCE was around 3.2%, with rising energy prices and the impact of tariffs on goods prices both trending upward. He also explicitly pointed out that near-term inflation expectations have risen this year, primarily due to oil price shocks.

Markets now widely expect the Federal Reserve to hold interest rates steady for the remainder of the year, and potentially even through 2027.

While the Federal Reserve has yet to implement any rate hikes, the market has already begun to anticipate potential future increases.

Bank of America ( BAC) stated that following a slightly hawkish Fed meeting, coupled with oil prices reaching new highs, the market has now priced in approximately 10 basis points of rate hikes over the next 12 months.

JPMorgan Chase ( JPM) holds a more aggressive view, noting a 50% probability of a rate hike by early 2027.

Goldman Sachs ( GS) maintains a more cautious stance; the firm still forecasts potential Fed rate cuts in September and December of this year, but with no current signs of labor market weakness, the likelihood of a cut is decreasing, although the bank remains skeptical about rate hikes.

The Federal Reserve's decision to maintain interest rates did not provide the market with new expectations for easing. Powell explicitly emphasized that the current policy stance is appropriate and that future decisions will remain data-dependent on a meeting-by-meeting basis, meaning the trading logic for faster near-term rate cuts has essentially been suppressed.

For U.S. equities, the most direct impact is that the scope for valuation expansion will remain constrained, particularly for interest-rate-sensitive small-caps, growth stocks, and high-valuation sectors. Conversely, tech stocks with robust cash flows, pricing power, and direct exposure to AI capital expenditures will demonstrate significantly stronger resilience.

Regarding the U.S. dollar, both the meeting and Powell’s comments leaned toward supporting continued strength, while the market is also seeing safe-haven demand from geopolitical risks. As long as U.S. inflation does not return to a clear downward trajectory and the Fed remains on hold for longer, the dollar will likely find support from both yield differentials and safe-haven flows.

Gold's reaction more directly reflects the pressure of "higher-for-longer" interest rates. After the Fed stood pat, gold prices weakened and retested the $4,500 psychological level but failed to break through, suggesting selling pressure has been absorbed. Gold is now poised to begin a technical recovery; for detailed market analysis, see the April 29 article: 4,500 USD Becomes the Life-and-Death Line for Gold Bulls: Will Gold Prices Continue to Fall This Week?

This content was translated using AI and reviewed for clarity. It is for informational purposes only.