FOMC Maintains Hawkish Hold...Powell Says "War Impact Uncertain"

Fed Holds Rates Steady for Second Time Since January

Brent Crude Surges Past $110 Again

U.S. Stocks and Treasury Markets Decline Together

Odds of a Rate Cut in the First Half Drop Further

On the 18th (local time), a press conference by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), was broadcast live on TV from the New York Stock Exchange (NYSE). Photo by AP Yonhap News

"If the price slowdown we expect does not actually materialize, there will be no interest rate cut."

The U.S. Federal Reserve (Fed) maintained a hawkish stance—favoring monetary tightening—even as it kept its benchmark interest rate unchanged for the second consecutive time since January. The Fed noted that the impact of the Middle East war on the U.S. economy and inflation is "uncertain," but made it clear that a rate cut would only be possible if a clear decline in inflation is confirmed. Meanwhile, as the possibility of the conflict escalating increased due to the bombing of Qatari energy facilities, international oil prices once again surpassed the $110 level, and both the U.S. stock and Treasury markets declined.

On the 18th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 46,225.15, down 1.63% from the previous trading day. The S&P 500 Index and the Nasdaq Index also ended down by 1.36% and 1.46%, respectively. Treasury yields rose (meaning bond prices fell). During the session, the 10-year U.S. Treasury yield climbed 6 basis points (1bp = 0.01 percentage point) to 4.26%. This is a significant increase compared to the pre-war rate of 3.97%. The yield on the 2-year U.S. Treasury, which is sensitive to monetary policy, rose 10 basis points to 3.77%.

The market reacted nervously to the hawkish outlook despite the rate freeze. After the decision, Chairman Jerome Powell underscored in a press conference that maintaining the current rate path is "conditional," revealing the Fed's hawkish stance. He specifically stated that the most important variable for future monetary policy is the "Iran war." In addition to tariffs, which the Fed currently prioritizes, Powell said the energy price shock from the Iran conflict could also be a factor for inflation. The Fed explained, "The implications of developments in the Middle East for the U.S. economy are uncertain." Powell also said, "There was discussion that the next move could be a rate hike," and added, "While we are not ruling out any possibility, most participating members do not see a rate hike as the base scenario."

At the Federal Open Market Committee (FOMC) meeting that day, the vote was 11 to 1 in favor of keeping the benchmark interest rate at 3.5–3.75%. Since the March FOMC, the probability of a rate cut in the first half of the year has dropped to single digits. According to the CME FedWatch Tool of the Chicago Mercantile Exchange, the rate futures market reflects a 6% probability of a cut in the first half.

Additionally, the market regarded the renewed possibility of an escalation—following the airstrike on Qatari energy facilities—and the resulting rebound of international oil prices (Brent crude) past $110 per barrel as added pressure. According to Investing.com, a real-time global financial information provider, May Brent crude was trading at $109.47 per barrel as of 8:18 a.m. (Korea Standard Time) on the 19th. At the same time, West Texas Intermediate (WTI) near-month futures were at $98.31 per barrel. WTI is typically traded at a slightly lower price than Brent crude.

This content was produced with the assistance of AI translation services.