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PremiumUS Fed Meet Live Highlights: The US Federal Reserve announced its interest rate decision on July 31 after a two-day Federal Open Market Committee (FOMC) meeting, leaving the benchmark interest rates unchanged at 5.25 per cent - 5.50 per cent for the eighth straight meeting, in line with Wall Street estimates.
Fed chair Jerome Powell-led rate-setting panel ended its fifth policy-setting meeting for 2024 on July 31 and unanimously voted to keep the policy rate at the 23-year high. The US central bank has maintained borrowing rates steady for 12 straight months to bring down inflation in the world's largest economy.
Powell on Wednesday set the stage for the central bank's first rate cut in four years, citing greater progress toward lower inflation and a cooler job market that no longer threatens to overheat the economy. Powell said if US inflation continues to fall, “a reduction in our policy rate could be on the table" when the Fed next meets in September.
"The broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate," he said, adding that there had been a "really significant decline in inflation, but we’re not quite at that point." In its policy statement, the Fed mentioned that US inflation has eased over the past year but ‘’remains somewhat elevated''.
After raising the policy rate by 5.25 percentage points since March 2022 in one of the swiftest Fed reactions to combat the worst outbreak of inflation in 40 years, the central bank has held the rate on hold since July 2023 to anchor in high inflation and consistently bring it down toward the two per cent target range.
Stay tuned to our US Fed Meeting Live blog for the latest updates on FOMC meeting outcome.
US Fed Chair Powell-led FOMC will now meet on September 17-18 to deliberate for the next set of policy decisions.
-Benchmark interest rates unchanged at 5.25-5.50 per cent, held at 23-year high mark for 12 straight months
-Fed chair Powell flags possible rate cuts in September if inflation moves further to two per cent target.
-Fed notes further progress on inflation targets. FOMC ‘’attentive to risks to both sides of its dual mandate''.
-FOMC will continue reducing its holdings of Treasury securities, agency debt and agency mortgage‑backed securities.
(Blog details and facts taken from US Federal Reserve website, with inputs from AFP, AP, Bloomberg, and Reuters.)
Dovish comments from Federal Reserve Chair Jerome Powell helped extend a rally in stocks that started with surge in key technology companies, pushing the S&P 500 to its biggest advance since February. Equities staged a powerful rebound, with the S&P 500 up over 1.5 per cent. Nvidia Corp. surged 13 per cent on a bullish analyst call.
The world’s most-valuable company added a record $329 billion in value — obliterating the single-day record that it has repeatedly set in the past few months. Treasury yields tumbled across the curve and the dollar slipped against all of its developed-market peers.
Powell said the Fed could cut rates “as soon as" September. His comments followed a Federal Open Market Committee decision to leave the federal funds rate in a range of 5.25 per cent to 5.5 per cent, a level they have maintained since last July.
The Nasdaq 100 climbed three per cent. Treasury 10-year yields declined eight basis points to 4.06 per cent. Oil rose after Hamas said Israel killed its political leader, stoking geopolitical risks. The yen rallied as the Bank of Japan raised interest rates and announced plans to cut bond purchases.
Nvidia Corp.’s ride this week is headed for the record books. The world’s most valuable company has added a record $329 billion in value — obliterating the single-day record that it has repeatedly set in the past few months.
The 13 per cent rally comes a day after a seven per cent rout wiped out more than $193 billion from the now $2.9 trillion company, continuing a run of volatility that makes even notoriously turbulent assets like Bitcoin look stolid.
In July alone, the shares have endured routs that account for four of the eight biggest market cap wipe-outs, according to data compiled by Bloomberg. The volatility comes as investors grapple with a violent rotation out of high-flying technology shares into left-behind companies that would benefit from Federal Reserve rate cuts. The chipmaker rallied 150% in the first six months of the year before better-than-expected inflation stoked bets that the central bank would cut as soon as September.
Investors pocketed profits rung up on artificial intelligence bets and piled into banks and cyclical companies. The rotation accelerated a week ago, when Alphabet Inc.’s AI spending left investors worried profits would be a long time coming. Those worries eased somewhat after Advanced Micro Devices Inc. gave an upbeat forecast on the back of its AI efforts, prompting a fresh rush back into tech.
Big technology stocks bounced back Wednesday and drove a rally for U.S. indexes, as Wall Street grew even more convinced long-sought cuts to interest rates will be arriving soon. The S&P 500 jumped 1.6 per cent for its best day since February. The Dow Jones Industrial Average rose 99 points, or 0.2 per cent, and the Nasdaq composite soared 2.6 per cent.
The widespread gains came as Treasury yields eased in the bond market after the Federal Reserve gave the clearest indication yet that it could begin lowering interest rates in September. Fed Chair Jerome Powell said policy makers are “getting closer to the point" of comfort about inflation where they could cut rates for the first time since COVID-19 crashed the economy.
“We think that the time is approaching," Powell said. “And if we do get the data that we hope we get, then a reduction in our policy rate could be on the table at the September meeting." (Blog details and facts taken from US Federal Reserve website, with inputs from AFP, AP, Bloomberg, and Reuters.)
Gold prices extended gains on Wednesday after Federal Reserve Chair Jerome Powell hinted that an interest rate cut could be on the table as early as September if inflation stays in line with expectations.
Spot gold was up 1.2 per cent at $2,437.39 per ounce as of 3:21 p.m. ET (1921 GMT) and logged its biggest monthly rise since March, gaining over four per cent. US gold futures settled 0.9 per cent higher at $2,473.
Spot silver was up 1.6 per cent at $28.85 per ounce. Platinum gained 2.1 per cent to $979.05 and palladium climbed 4.6 per cent to $928.50. All three metals were headed for monthly declines.
Oil prices rose nearly three per cent on Wednesday as investors worried the conflict in the Middle East could widen after the killing of a Hamas leader in Iran, and after a sharp fall in US crude stockpiles.
Global benchmark Brent crude futures for September delivery, which expired on Wednesday, settled up $2.09, or 2.66 per cent, at $80.72 a barrel. The more active October contract gained $2.77 to $80.84.
US West Texas Intermediate (WTI) crude futures rose $3.18, or 4.26 per cent, to settle at $77.91 a barrel, their biggest daily gain since October 2023. Still, Brent finished July with nearly a seven per cent monthly decline with WTI down nearly four per cent for the month.
US crude stocks decreased by 3.4 million barrels last week. Stocks fell for a fifth straight week, the longest streak of drawdowns since January 2021. A day earlier, Brent and WTI both lost about 1.4 per cent, closing at their lowest levels in seven weeks after falling last week on hopes of a Gaza ceasefire agreement that could ease Middle East tensions and accompanying supply concerns.
Tensions in the oil-producing region heated up overnight on news that Hamas leader Ismail Haniyeh was assassinated in Iran. This came a day after the Israeli government claimed it killed Hezbollah's most senior commander in an airstrike on Beirut in retaliation for Saturday's rocket attack on Israel.
Separately, the US also conducted a strike in Iraq in the latest conflict in the region. A 0.4 per cent fall in the US dollar index also supported prices. A weaker dollar can boost demand for oil by making the greenback-denominated commodity cheaper for holders of other currencies.
Limiting gains were concerns about fuel demand in China, the world's top crude oil importer. China's manufacturing activity in July shrank for a third month, an official factory survey showed on Wednesday.
Ample spare production capacity held by OPEC members also weighed on prices. OPEC+ is expected to stick to their current deal on production and start unwinding some output cuts from October. Top ministers from OPEC+, will hold an online joint ministerial monitoring committee meeting (JMMC) on Thursday.
Traders on Wednesday added to bets the Federal Reserve will start easing in September and go big when it does, even after Fed Chair Jerome Powell said policymakers are not thinking about a 50-basis-point interest rate cut "right now."
Rate futures contracts continue to center around expectations for a more usual 25-basis point cut in September to start a series of rate reductions that could last into next year.
But as Powell during his post-meeting news conference repeatedly said the central bank has room to respond if the labor market unexpectedly weakens, markets began a turn. Rate futures prices now reflect about a 17 per cent chance of a 50-basis point rate cut in September, versus about five per cent before Powell began speaking.
Prices also reflect increased confidence the Fed will cut a total of 75 basis points over its final three meetings of the year, most likely in 25-basis-point increments, bringing the policy rate down to a 4.5 per cent-4.75 per cent range.
The dollar added to losses on Wednesday after the Federal Reserve held interest rates steady but opened the door to reducing borrowing costs as soon as its next meeting in September. Fed Chair Jerome Powell said in comments after the statement from its two-day meeting that an interest rate cut could be on the table as early as September if inflation moves down in line with expectations, growth remains reasonably strong and the labor market remains as it is.
But he also said that the US central bank remains data dependent and has not made any decisions about future meetings. Traders have fully priced in a September rate cut, which may take pressure of the Fed to signal a certain move then. Traders are also expecting a second and possible third cut by year-end.
The dollar index fell as low as 103.92 and was last down 0.34 per cent at 104.09. It is on track for a monthly loss of 1.7 per cent. The next major US economic release that is likely to drive Fed policy will be Friday’s government jobs report for July.
The Japanese yen hit a four-month high against the dollar on Wednesday after the Bank of Japan (BoJ) raised rates to the highest since 2008 and indicated that more hikes may follow. The BOJ raised the overnight call rate target to 0.25% from 0-0.1%, the largest increase since 2007.
Japan's rate increase came just months after the BOJ ended eight years of negative interest rates as the bank's chief seeks to dismantle his predecessor's unorthodox policies. The Japanese central bank also announced plans to halve its monthly Japanese government bond (JGB) purchases to three trillion yen as of January-March 2026.
The yen has rallied since hitting a 38-year low of 161.96 against the greenback on July 3, in large part boosted by interventions by Japanese authorities. Traders unwinding bets that were short the yen and long the dollar has added to the move. Japanese authorities spent 5.53 trillion yen ($36.8 billion) intervening in the foreign exchange market this month to boost the currency.
The US dollar was last down 1.87 per cent at 149.91 yen and got as low as 149.63, the lowest since March 19. It is on track to post a monthly loss of 6.9 per cent against the Japanese currency, the largest since November 2022.
With policymakers keeping borrowing costs unchanged for an eighth straight meeting, traders await Powell’s address at Jackson Hole economic symposium in late August for further clues on the path of future rate cuts.
Buy signals flashed across Wall Street Wednesday as traders grew optimistic rate cuts coming soon after Federal Reserve Chair Jerome Powell left the door open to lowering borrowing costs at the central bank’s next meeting in September. The S&P 500 Index soared as much as 2.1 per cent to touch a session high, powered by gains in rate-sensitive technology stocks like Nvidia Corp., Apple Inc. and Amazon.com Inc.
If those gains hold into the close, it will mark the index’s best Fed day session since July 2022, according to data compiled by Bloomberg. The Nasdaq 100 rallied 3.2 per cent, putting it on pace for its best session since February 2023. Both indexes pared some of their gains after Powell stopped speaking.
Investors are awaiting further signals from Powell on whether the market’s aggressive dovish bid is now overdone after US labor costs rose less than forecast in the second quarter, while the Fed’s preferred measure of underlying US inflation — the so-called core personal consumption expenditures price index — rose at a tame pace in June, near the Fed’s two per cent target.
MSCI'S global equities index added to gains on Wednesday and the dollar slightly pared losses after the US Federal Reserve held interest rates steady but opened the door to reducing borrowing costs as soon as September.
Treasury yields pared losses after a Fed statement in line with market expectations. The central bank noted further progress towards its two per cent inflation objective and said the economy "continued to expand at a solid pace," while job gains moderated and the unemployment rate "remains low."
On Wall Street at 02:48 p.m. the Dow Jones Industrial Average rose 386.22 points, or 0.95 per cent, to 41,129.55, the S&P 500 gained 106.22 points, or 1.95 per cent, to 5,542.66 and the Nasdaq Composite gained 494.53 points, or 2.88 per cent, to 17,641.95.
MSCI's gauge of stocks across the globe rose 14.95 points, or 1.87 per cent, to 816.38. Earlier Europe's STOXX 600 index had closed up 0.8 per cent. In US Treasuries, longer-dated US Treasury yields pared declines but were still slightly lower while shorter-duration debt rose after the Fed statement.
The yield on benchmark US 10-year notes fell 3.2 basis points to 4.109 per cent, from 4.141 per cent late on Tuesday. The 30-year bond yield fell 3.6 basis points to 4.3627 per cent from 4.399 per cent late on Tuesday. The two-year note yield, which typically moves in step with interest rate expectations, fell 1.1 basis points to 4.3481 per cent, from 4.359 per cent late on Tuesday.
In currencies, the dollar pared losses slightly after the widely expected Fed statement. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was down 0.33 per cent at 104.11. The euro was up 0.09 per cent at $1.0825. Against the Japanese yen, the dollar weakened 1.49 per cent to 150.49.
Federal Reserve Chairman Jerome Powell said on Wednesday that politics will have no bearing on the policy choices the U.S. central bank will make as the presidential election approaches in November.
"We never use our tools to support or oppose a political party or politician or political outcome," Powell said at a press conference following the Fed's latest policy meeting. Powell was facing a question as to whether the election would affect what the central bank does with interest rate policy.
Federal Reserve Chair Jerome Powell said on Wednesday that the overall quality of falling inflation pressures is a good thing to see. "This is a broader disinflation" that is happening now, with inflation moderation moving beyond goods prices into non-housing services and housing factors, Powell said in a press conference. When it comes to hopes that inflation will moderate to two percent, "confidence is growing because we’ve been getting good data."
Federal Reserve Chair Jerome Powell said an interest-rate cut could come as soon as September after the US central bank voted to leave its benchmark at the highest level in more than two decades.
“If we were to see, for example, inflation moving down quickly — or more or less in line with expectations — growth remains reasonably strong, and the labor market remains consistent with its current condition, then I would think that a rate cut could be on the table at the September meeting," Powell told reporters Wednesday.
Policymakers also made several adjustments to the language of a statement released after their two-day meeting in Washington. Notably, the committee shifted to saying it is “attentive to the risks to both sides of its dual mandate," rather than prior wording focused just on inflation risks.
“In recent months, there has been some further progress toward the committee’s two per cent inflation objective," the committee said in a statement released Wednesday. “The committee judges that the risks to achieving its employment and inflation goals continue to move into better balance."
Officials also tempered their assessment of the labor market, noting job gains had moderated and the unemployment rate has moved up, but is still low. They said inflation has eased over the past year but remains “somewhat elevated."
Still, policymakers retained language that they didn’t expect it would be appropriate to lower borrowing costs until they had gained “greater confidence" that inflation is moving toward their target sustainably.
The Canadian dollar strengthened to a one-week high against its US counterpart on Wednesday as data showed faster-than-expected growth in Canada's economy and the Federal Reserve signaled a possible move to cutting interest rates. The loonie was trading 0.3 per cent higher at 1.3810 per US dollar, or 72.41 U.S. cents, after touching its strongest intraday level since last Wednesday at 1.3788.
Canada's gross domestic product grew by 0.2 per cent in May, above estimates for a 0.1 per cent increase, while a preliminary estimate for June showed the economy expanded by 0.1 per cent, taking the quarterly economic growth rate to 2.2 per cent.
Last week, the Bank of Canada forecast second-quarter growth of 1.5 per cent as it cut interest rates for a second time since June, lowering its benchmark rate by 25 basis points to 4.50 per cent.
Federal Reserve Chair Jerome Powell said recent inflation data is increasing the central bank's confidence that inflation pressures are moving back to the two per cent target. After inflation data moderated in the second quarter, Fed officials have "gained greater confidence" price pressures are moderating in way that will open the door to a rate cut, Powell said in a press conference following the Fed's latest policy meeting where they kept interest rates steady.
The US central bank could make its first post-pandemic interest rate cut "as soon as" in September, said Federal Reserve Chair Jerome Powell on Wednesday.
"The broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate," he told a press briefing, adding that inflation has eased "notably" in recent years.
Longer-dated US Treasury yields pared declines but were still slightly lower on Wednesday while shorter-duration debt was rose, after the Federal Reserve kept interest rates at their current levels, as was widely expected.
Yields were lower before the Fed statement after economic data indicated a slowing in the labor market and wage growth indicating the central bank has some cushion to cut rates this year.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, rose 1.8 basis points to 4.377 per cent after falling to 4.33 per cent, its lowest since February 2.
US labor costs increased moderately in the second quarter as private sector wages grew at the slowest pace in 3-1/2 years, more evidence that inflation was firmly on a downward trend and could help facilitate an interest rate cut in September.
The report from the Labor Department on Wednesday followed data last week showing inflation subsided considerably last quarter, with sub-three per cent readings in all the measures. Labor costs are likely to cool further as the jobs market continues to ease.
The employment cost index (ECI), the broadest measure of labor costs, increased 0.9 per cent last quarter after rising by an unrevised 1.2 per cent in the first quarter, the Labor Department's Bureau of Labor Statistics said.
While Fed officials are wary of any actions that could mar their data-not-politics approach to setting monetary policy, the steady drop in inflation in recent months prompted a broad consensus that the inflation battle was near an end.
"This was a baby step on the way to a September rate cut," said Omair Sharif, president of Inflation Insights. "I expect that further good news on the inflation front in July should set up ... (Powell) to deliver a more meaningful signal that a rate cut in September is very likely."
The central bank uses the personal consumption expenditures price index for its two per cent annual inflation target. The PCE price index rose 2.5 per cent in June after exceeding seven per cent in 2022.
The Fed's latest policy statement also removed standing language that it was "highly attentive to inflation risks," and replaced it with an acknowledgement that policymakers were now "attentive to the risks to both sides of its dual mandate," which includes a charge from Congress to maintain maximum employment consistent with stable prices.
US central bankers have said it would be appropriate to reduce borrowing costs before inflation actually returns to their target to account for the time it takes monetary policy to affect the economy.
So far the economy "has continued to expand at a solid pace," the Fed said in its statement, and while "job gains have moderated," the unemployment rate “remains low." But the jobless rate has been rising, and policymakers have put more focus of late on avoiding the sort of sharp rise in unemployment often associated with high interest rates and slowing inflation.
Big technology stocks are bouncing back and boosting US indexes on Wall Street Wednesday, one of the day’s many sharp swings for financial markets around the world.
The S&P 500 was rallying by 1.6 per cent in afternoon trading and on track for its best day in five months. The Dow Jones Industrial Average was up 279 points, or 0.7 per cent, as of 2:05 p.m. Eastern time, and the Nasdaq composite was 2.4 per cent higher.
The moves were even bigger in the oil market, where prices jumped roughly four per cent after the death of Hamas’ political leader raised worries about the flow of crude in the Middle East. In the US bond market, Treasury yields were mixed after the Federal Reserve held its main interest rate at a two-decade high but gave some indication that an easing may soon be on the way.
A batch of softer-than-expected reports on the US economy released during the morning strengthened hopes that inflation is slowing enough to convince the Fed to cut rates at its next meeting in September, and the Fed said in its afternoon statement that “there has been some further progress" in getting inflation down to its two per cent goal.
On Wall Street, Advanced Micro Devices rallied 3.1 per cent after reporting better profit and revenue for the latest quarter than analysts expected, thanks in part to accelerating artificial-intelligence business. That helped drive Nvidia, the chip company that’s become the poster child for Wall Street’s frenzy around AI, up 11.6 per cent a day after it lost seven per cent.
After a small uptick in inflation earlier this year, recent data suggest the Fed's mission of bringing inflation back down to its long-term target of two per cent is now firmly back on track.
Its favored measure of headline inflation eased to an annual rate of 2.5 per cent last month, while economic growth has remained resilient, and the labor market has come into better balance.
"In recent months, there has been some further progress toward the Committee's 2 percent inflation objective," the Fed said. This marks a slight change in tone from its decision in June, when it noted only that "modest further progress" had been made.
"The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance," the Fed said, adding that it was "attentive to the risks to both sides of its dual mandate."
The US dollar slightly pared losses on Wednesday after the Federal Reserve held interest rates steady but opened the door to reducing borrowing costs as soon as its next meeting in September, as was widely expected.
"There has been some further progress toward the Committee's two per cent objective" in inflation, the central bank's Federal Open Market Committee said in a statement at the end of a two-day policy meeting.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was last down 0.1 per cent on the day at 104.34, with the euro falling 0.08 per cent to $1.0806.The greenback was also down 1.02 per cent at 151.2 Japanese yen .
The Federal Reserve said Wednesday that greater progress has been made in reducing inflation to its two per cent target, a sign that the central bank is moving closer toward cutting its key interest rate for the first time in four years.
In a statement issued after it concluded its two-day meeting, the Fed also said that “job gains have moderated" and acknowledged that the unemployment rate has risen.
The Fed is required by Congress to pursue stable prices and maximum employment, and the statement said the central bank is “attentive to the risks" to both goals, a shift after several years of focusing exclusively on combatting inflation.
Traders on Wednesday kept bets the Federal Reserve will start dialing back on restrictive policy in September, starting with a 25 basis-point interest-rate cut at that month's meeting and delivering two more like-sized rate cuts in each of November and December, after the Fed acknowledged "some further progress" towards its two per cent inflation goal.
Before the Fed's statement, released at the end of a meeting at which officials decided to hold the policy rate in the 5.25 per cent-5.5 per cent range, interest-rate futures contracts were pricing in an 89 per cent chance of a 25-basis point reduction in September, with the balance of bets on a bigger 50-basis point cut. Rate futures prices now reflect a 95 per cent chance the first rate cut will be 25 basis points.
The US Federal Reserve left its key lending rate unchanged again on Wednesday and said it had made "some further progress" in its inflation fight. Policymakers voted unanimously to maintain the US central bank's benchmark interest rate between 5.25 per cent and 5.50 per cent, the Fed announced in a statement, adding it was "attentive to the risks to both sides of its dual mandate."
The US is considering unilateral restrictions on China’s access to AI memory chips and equipment capable of making those semiconductors as soon as next month, a move that would further escalate the tech rivalry between the world’s biggest economies.
The measure is designed to keep Micron Technology Inc. and South Korea’s leading memory chipmakers SK Hynix Inc. and Samsung Electronics Co. from supplying Chinese firms with so-called high-bandwidth memory, or HBM, chips, according to people familiar with the matter, who emphasized that no final decision has been made. The three firms dominate the global HBM market.
European equities rose on Wednesday ahead of central-bank decisions in the US and Britain, with gains led by a rally in semiconductor stocks. The Stoxx Europe 600 traded 0.8 per cent higher at the close in Paris, ending July with a monthly gain of about 1.3 per cent.
Tech was by far the best performing sector of Wednesday, with ASML Holding NV surging as much as 11 per cent after Reuters reported that the Biden administration would exempt a number of foreign chip-equipment makers from upcoming export restrictions.
In the US, Microsoft Corp.’s results on Tuesday have added to concern the artificial-intelligence frenzy might have gone too far. Shares of the company are down 1.4% in regular trading in the US on Wednesday. Meta Platforms Inc, Amazon.com Inc. and Apple Inc, are still due to report earnings.
Radhika Rao, Executive Director and Senior Economist, Eugene Leow, Senior Rates Strategist, Philip Wee, Senior FX Strategist, DBS Bank on US yields:
US Treasury yields may have reached the point where there is too much of a pivot party in the price. Yields have fallen steadily over the past two months as inflation worries recede. More recently, geopolitical worries in the Middle East and a stalling tech rally have added to haven demand. The front end of the curve is already pricing in seven cuts by end-2025, with 2Y yields at levels seen in early January (4.2-4.4 per cent range).
Back then, the USD rates space was wrong about the timing and magnitude of pivot and we are wary that a repeat may occur. Under current conditions where calibrated Fed easing has already been priced and no obvious stress points from the economy / or financial conditions, there should is little need to frontload even more cuts. However, markets tend to overshoot.
There is an outside chance that the Fed would cut (not our base case), and that would trigger a kneejerk rally across USTs. It could also well be that a perceived dovish Fed (any hints of upcoming easing) could drive another leg lower in yields. Under our current assumption of US soft-landing, large declines in UST yields from here should be tactically faded.
Oil prices rose more than two per cent on Wednesday, rebounding from seven-week lows, as the killing of a Hamas leader in Iran ratcheted up tensions in the Middle East and overshadowed a drawdown in US crude stockpiles driven by robust exports.
Brent crude futures rose $1.97, or 2.5 per cent, to $80.60 a barrel by 11:40 a.m. EDT (1540 GMT) ahead of expiry on Wednesday, while the more active October contract was up $2.14 at $80.21. US West Texas Intermediate crude futures gained $2.32, or 3.1 per cent, at $76.20 a barrel.
US crude stocks decreased by 3.4 million barrels last week, government data showed, more than thrice analysts' expectations in a Reuters poll for a 1.1 million-drop. Stocks fell for a fifth straight week, the longest streak of drawdowns since January 2021.
The Nasdaq and the S&P 500 jumped around two per cent on Wednesday, as investors hoped for hints from the Federal Reserve on the timing of rate cuts, a bullish forecast from AMD boosted chip stocks and Microsoft slipped after a higher spending forecast.
Both the S&P 500 and the Nasdaq hit one-week highs and were on track to log their biggest one-day gains since February. Advanced Micro Devices climbed five per cent after lifting its 2024 forecast for AI-chip sales, helping Nvidia jump 12 per cent.
The Philadelphia SE Semiconductor index rose five per cent, set for its biggest one-day gain since May 2023, but on track for its worst month since October 2023 after the recent chip stocks rout.
Gold prices witnessed their best monthly performance since March on Wednesday, driven by geopolitical concerns and expectations of an interest rate cut in September, with attention turning to the US Federal Reserve's upcoming policy decision.
As of 1341 GMT, spot gold rose 0.7 per cent to $2,424.29 per ounce, marking a gain of over four per cent for the month. Similarly, US gold futures increased by 0.7 per cent to $2,422.50.
Spot silver rose 1.6 per cent to $28.83 per ounce but is on track for a second consecutive monthly loss. Platinum increased by 1.3 per cent to $971.55, and palladium surged 4.5 per cent to $929, though both metals are set to end the month lower.
Adding to the support for non-yielding bullion, the dollar index fell, and US 10-year Treasury yields dropped to their lowest level in over four months. Bank of America believes silver is likely to outperform gold due to its greater sensitivity to manufacturing activity.
The latest report from the Commerce Department also showed that consumer spending slowed slightly last month. Signs of easing price pressures and a cooling labour market could boost Fed officials' confidence that inflation is moving toward the US central bank's two per cent target.
The Commerce Department's Bureau of Economic Analysis last reported that the personal consumption expenditures (PCE) price index increased 0.1 per cent last month after remaining unchanged in May. In the 12 months through June, the PCE price index climbed 2.5 per cent. That was the smallest year-on-year (YoY) gain in four months and followed a 2.6 per cent advance in May.
The BoJ surprised markets on Wednesday when it hiked interest rates and announced a detailed plan to slow its bond-buying. This move of BoJ is a step toward gradually phasing out a decade of massive stimulus.
“The decision, which defied dominant market expectations for the BoJ to stand pat on rates, takes its short-term policy rate to levels unseen since 2008," reported Reuters.
After the BoJ surprise, all eyes are on the US Fed policy outcome, which is due later today. The Fed is widely expected to keep rates unchanged on Wednesday, but market participants hope there will be hints for the start of the rate reduction cycle in September.
US Treasury yields were mostly lower on Wednesday, after economic data indicated a slowing in the labor market and wage growth ahead of a policy announcement by the Federal Reserve later in the day.
The ADP National Employment Report showed private payrolls rose by 122,000 jobs this month, short of the 150,000 of economists polled by Reuters, after advancing by an upwardly revised 155,000 in June.
In addition, the employment cost index (ECI), the broadest measure of labor costs, increased 0.9 per cent last quarter, below the one per cent estimate, after rising by an unrevised 1.2 per cent in the first quarter, another sign inflation is cooling.
Fitch Ratings said on Wednesday it expects the US Federal Reserve to cut interest rates twice this year - in September and December. "A soft landing is likely with moderating inflation and low unemployment, and we are projecting annual economic growth of 2.1 per cent, down from 2.5 per cent in 2023," the ratings agency said.
US prices increased moderately in June as declining cost of goods tempered a rise in the cost of services, underscoring improving inflation environment that economists and analysts expect could help the Fed to begin cutting rates in September.
The report from the Commerce Department on Friday showed consumer spending slowed a bit last month. Signs of easing price pressures and a cooling labor market could boost the confidence of Fed officials that inflation is moving toward the US central bank's two per cent target.
Fitch said US consumer spending continues to hold up well, but it anticipates a modestly weaker credit environment in the second half of the year. The comments follow earnings reports from several large US banks, payments and consumer companies, which showed a weakening environment for US consumers, with pressure building on the lower-income bracket.
On Wall Street, the S&P 500 and the Nasdaq were sharply higher after chip stocks rallied following bullish forecast from AMD. In the bond market, the yield on the 10-year Treasury slipped to 4.10 per cent from 4.14 per cent late on Tuesday.
At 9:54 a.m. ET, the Dow Jones Industrial Average was down 33.60 points, or 0.08 per cent, at 40,709.73, the S&P 500 was up 65.74 points, or 1.21 per cent, at 5,502.18, and the Nasdaq Composite was up 347.43 points, or 2.03 per cent, at 17,494.85.
At the opening bell, the Dow Jones Industrial Average rose 25.5 points, or 0.06 per cent, to 40,768.88. The S&P 500 rose 69.2 points, or 1.27 per cent, to 5,505.59, while the Nasdaq Composite rose 351.8 points, or 2.05 per cent, to 17,499.231.
Since last July, the stock markets in the US and India have gained significantly. Experts believe a rate cut of 25 bps may not significantly impact the market, but a surprise cut this week may give a fresh boost.
"The market always discounts events in advance. Normally, rising interest rates are considered negative for the stock market, but the US markets hit all-time highs when interest rates were increased by 500 bps. This is because the market discounted the possibility that the rate hikes would end soon and the reversal would happen," said G. Chokkalingam, the founder and head of research at Equinomics Research Private Ltd.
"When the actual reversal happens, it may not impact the market much. But if, by any chance, a rate cut happens this week only, then it might boost the market because the market expects rate cuts in September and not in July. A surprise 25 bps cut in July is beyond expectation," Chokkalingam said.
A broad gauge of US labor cost growth closely watched by the Federal Reserve cooled in the second quarter by more than forecast, supporting a trend of gradually easing inflationary pressures. The employment cost index, which measures wages and benefits, increased 0.9 per cent in the April-to-June period, after rising by the most in a year at the start of 2024, according to Bureau of Labor Statistics figures out Wednesday.
The figures corroborate recent data that show the labor market is moderating toward its pre-pandemic trend. Other measures also point to cooling wage growth, as well as a slower pace of hiring and rising unemployment. The S&P 500 opened higher and Treasuries extended gains.
Fed Chair Jerome Powell testified to Congress earlier this month that the job market is no longer an inflationary force, and he’s likely to give a similar assessment when he speaks at the conclusion of the central bank’s meeting later Wednesday. While policymakers are expected to hold interest rates steady, Powell may hint at a cut in September given the recent softness in the labor market and a broader easing in price pressures.
The Federal Reserve began the debate on interest rates on Tuesday, with analysts and traders widely expecting another pause -- and hoping for clues about a September rate cut. Fed officials have previously admitted to moving too slowly to stem an inflationary surge in 2021 and 2022, and have been wary of cutting rates too soon and accidentally reigniting inflation.
Recent data indicates that inflation continues to slow toward the US central bank's long-term target of two percent, while economic growth remains strong and the labor market is showing signs of coming into better balance. Against this backdrop, analysts will be looking for the Fed to signal that it may soon move ahead with an interest rate cut.
In the June meeting, the Fed said that it expects unemployment in the US will stay at its current four per cent rate by the end of this year and rise to 4.2 per cent by the end of 2025. The expectation that the unemployment rate will remain around those low levels indicates that the officials believe that while the job market will gradually slow, it will remain fundamentally healthy.
US job openings fell marginally in June, and data for the prior month was revised to reflect the economy's continued labour resilience. The Labour Department's Bureau of Labour Statistics said in its Job Openings and Labour Turnover Survey, or JOLTS report, on Tuesday that job openings - a measure of labour demand - had dropped 46,000 to 8.184 mn by the last day of June.
As part of the updated quarterly economic forecasts issued by the Fed in the June meeting, policymakers projected that the economy will grow 2.1 per cent this year and two per cent in 2025, the same as they had envisioned in March.
However, the latest official data showed that the real gross domestic product (GDP) in the US increased at a rate of 2.8 per cent for the April to June quarter of the financial year 2024-25. The strong GDP print further raised expectations of a rate cut in September.
The increase in the real GDP is reflected in the increase in consumer spending on goods and services with a key focus on health care, housing and utilities, and recreation services. The US GDP increased by 4.5 per cent or $312.2 billion in the first quarter of 2024.
As per the June verdict, the FOMC expects core inflation to be 2.8 per cent by the year-end, according to their preferred gauge, up from a previous forecast of 2.6 per cent. The latest official data showed that US inflation cooled for the third straight month and rose less than expected in June, giving a major boost to Wall Street bets on definite interest rate cuts by the US Federal Reserve.
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During the release of the last CPI inflation data, traders moved forward bets on a second rate cut to November, with about even odds of a third rate cut by year's end. Banking giants JPMorgan and Macquarie also pulled forward their expectations for an initial rate cut to September from November and December, respectively. Also, according to CME Group's FedWatch Tool, September is when futures traders expect officials to start interest rate reductions.
According to a majority of analysts and economists on Wall Street, the US Fed would keep its key repo rate unchanged at the conclusion of the July 30-31 meeting, with a dovish commentary by Fed chair Jerome Powell.
‘’Market focus is on the upcoming Fed policy meeting on Wednesday, July 31, 2024. No changes are expected, but the view of a potential rate cut in September increases the probability of dollar weakness,'' said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.
The US Federal Reserve will announce its fifth interest rate decision for 2024 later tonight (July 31) after a two-day Federal Open Market Committee (FOMC) meeting. Wall Street expects the US central bank to keep the benchmark interest rates between 5.25 per cent - 5.50 per cent today. However, market participants will focus on hints that lift bets of a rate cut in September.
