In the January meeting, the Federal Reserve (FED) opted to maintain Fed funds rate at 5.25%-5.5%, holding steady at its 23-year high for the fourth consecutive meeting, aligning with expectations. Policymakers conveyed that they are hesitant to lower rates until they are more confident in inflation sustainably approaching 2%.  

During the press conference, Fed Chair Powell indicated the likelihood of rate reduction sometime this year but emphasized that decisions will be made on a meeting-by-meeting basis, expressing skepticism about a cut in March. Simultaneously, the Fed omitted references to potential rate hikes in its statement, citing improved balance in the risks associated with achieving employment and inflation goals.  

However, the Fed emphasized readiness to adjust monetary policy if emerging risks threaten those objectives. The central bank acknowledged a slight easing of inflation over the past year but highlighted that it remains elevated. Consequently, the US dollar strengthened and rebounded above 103.5 levels, while the US 10-year Treasury yield hovers near 2-week low of 3.97%.  

Nonetheless, selling pressures hit stocks. During Wednesday’s trading session, Dow Jones fell by 0.82%, the S&P 500 went down by 1.61%, and the Nasdaq Composite plunged by 2.23%. All 11 sectors of the S&P concluded in the red territory, with communication services, technology, and energy leading the selloff. 

(Fed Fund Rates) 

(Dollar Index Six-month Chart) 

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