US stock index futures pointed to a steady open on Wednesday as investors remained cautious ahead of the Federal Reserve’s policy decision due later in the day. Markets largely expect the Fed to hold interest rates steady while providing cues on the timing of future cuts.
If the Fed maintains the status quo, it will mark the fifth consecutive meeting, reflecting its wait-and-see approach amid growing concerns that the ongoing trade war could reverse progress toward the 2% inflation target.
Apart from the Fed outcome, investors are also awaiting earnings reports from two ‘Magnificent Seven’ firms—Meta Platforms and Microsoft. Stronger-than-expected growth in the U.S. economy did little to shift investor focus away from interest rates and corporate earnings.
Fed funds futures are pricing in a nearly 98% probability that the central bank will keep its key rate unchanged at 4.25%–4.5%, according to CME Group’s FedWatch tool. However, Fed Chair Jerome Powell could face dissent from colleagues who believe it is time to provide more support to a slowing labor market.
The Federal Reserve may see a rare split vote, with Trump-appointed governors Christopher Waller and Michelle Bowman reportedly likely to dissent against Powell’s decision to hold rates steady. If both dissent, it will mark the first multi-governor opposition since 1993, according to a Wall Street Journal report.
Following the decision, traders will closely watch Powell’s press conference for insights into the Fed’s policy path. This comes as President Trump and his allies continue pressuring the central bank to lower borrowing costs.
US economy rebounds with 3%
US economic activity rebounded in the second quarter on a modest pickup in consumer spending and a marked drop in imports after a scramble to secure foreign goods earlier in the year.
Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased an annualized 3% after shrinking at a 0.5% rate in the previous period, according to preliminary government data out Wednesday.
Beyond the recent tariff-related swings, second-quarter economic activity was more moderate. Consumer spending — which accounts for two-thirds of GDP — advanced 1.4%, marking the tamest growth in consecutive quarters since the pandemic. Business investment growth cooled, Bloomberg reported.
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