08
May 2025
The US Federal Reserve held the funds rate steady between 4.25%–4.50% for a third consecutive meeting in May 2025
Adriaan Pask
Chief Investment Officer, PSG Wealth
Event
• The US Federal Reserve held the funds rate steady between 4.25%–4.50% for a third consecutive meeting in May 2025. This was in line with expectations, as officials maintained a wait-and-see approach amid concerns that President Donald Trump’s tariffs could fuel inflation and hinder economic growth.
• Policymakers noted that uncertainty surrounding the economic outlook has increased further, with heightened risks of both rising unemployment and higher inflation.
The Impact
• US stocks mostly edged lower on Wednesday after the Federal Reserve’s interest rate decision and warnings of potential stagflation, alongside concerns over the prolonged impact of US tariffs. The S&P 500 declined by 0.40%, the Nasdaq 100 fell 0.80%, while the Dow Jones hovered near the flatline.
• The US Dollar Index fell to approximately 99.6 on Thursday morning, reversing gains from the previous session as markets digested the Federal Reserve’s latest policy stance and looked ahead to high-level trade talks between the US and China.
• The 5-year US Treasury yield rose to 3.89%, while the yields for the 10-year and 30-year notes came in at 4.29% and 4.79%, respectively
The Assessment
• The Federal Reserve’s latest policy statement underscores growing concern about the fragile balance between its dual mandate of full employment and price stability. Recent tariff measures introduced by
President Donald Trump have complicated this balancing act, as they threaten to both fuel inflation and dampen economic growth.
• We are, however, mindful of the impact that a particularly challenging interest rate cycle may have on our portfolios and continue to monitor developments closely—while remaining confident in our positioning and committed to identifying opportunities amid the evolving landscape.
• The next interest rate decision will be announced on Wednesday, 18 June 2025.