The Federal Reserve's statement dampens interest rate cut expectations, Powell's press conference "saves the day," U.S. stocks, bonds, and gold see narrowed declines

On January 29th, local time Wednesday, the Federal Reserve announced its interest rate decision, removing the phrase "inflation is making progress toward the target" from the statement, affirming the robustness of the labor market, and market expectations for rate cuts have somewhat retreated. Following the statement, major assets reacted to the hawkish tone, with U.S. stocks, U.S. Treasuries, and gold declining.

However, Powell mentioned in the press conference that the removal of the "inflation" phrase was merely to simplify the sentence and did not imply that inflation is rising again, adding that it was not meant to send a signal. He also stated that the Federal Reserve's policy rate is significantly above the neutral rate. Major assets reacted dovishly, with the declines in U.S. stocks, U.S. Treasuries, and gold narrowing. Nevertheless, U.S. stocks still closed lower across the board.

Before the Federal Reserve's Decision Announcement

Before the Federal Reserve's decision statement was released, U.S. stocks fell, and U.S. Treasury yields rose during the day:

• The S&P 500 index fell 0.5%, the Dow Jones Industrial Average fell 0.1%, and the Nasdaq fell 0.8%. Nvidia fell over 6%, Tesla fell 2.1%, and Apple fell 0.5%.
• The yield on the U.S. 10-year Treasury rose by 2.2 basis points to 4.5546%; the yield on the two-year U.S. Treasury rose by over 2 basis points, reaching a daily high of 4.2196%.
• The U.S. dollar index rose and then fell back, gaining 0.06% during the day, currently at 107.934 points. The Bloomberg Dollar Index was roughly flat at 1301 points. The U.S. dollar fell 0.29% against the Japanese yen, the euro fell 0.1% against the U.S. dollar, and the British pound was roughly flat against the U.S. dollar.
• Spot gold fell 0.42%, currently at $2752.

After the Federal Reserve's Decision Announcement

The Federal Reserve announced its interest rate decision, holding steady as expected, with no rate cuts, and removed the phrase "inflation is making progress toward the target" from the statement. The Federal Reserve also stated that the unemployment rate remains stable at a low level, and the labor market conditions are still robust.

The Federal Reserve's statements on inflation led traders to reduce their bets on the FOMC's rate cut prospects for this year, with declines in U.S. stocks and U.S. Treasuries widening:

• The S&P 500 index fell 0.7%, the Dow Jones Industrial Average fell 0.3%, and the Nasdaq fell 1%.
• The yield on the two-year U.S. Treasury rose sharply by about 4 basis points, reaching a daily high of 4.2547%, with an overall increase of over 5 basis points during the day.
• Gold prices fell about $6 in the short term, hitting a daily low of $2745.52, down about 0.6% for the day.
• The offshore renminbi fluctuated around 7.27 yuan against the U.S. dollar, gaining 0.05% during the day.

Powell's Press Conference

At 03:30 Beijing time on Thursday, Federal Reserve Chairman Powell held a press conference:

He stated that there is no rush to adjust the policy stance, and the Federal Reserve will not take action until more evidence is seen. When asked about the prospects for a rate cut in March, Powell reiterated that there is no need to rush.

Powell made several dovish statements. He mentioned that the removal of the "inflation" phrase was merely to simplify the sentence and did not imply that inflation is rising again, adding that it was not meant to send a signal. The Federal Reserve's policy rate is significantly above the neutral rate, and the inflation target will not be the focus of the framework assessment.

During Powell's remarks, the intraday declines in U.S. stocks, U.S. Treasuries, and gold significantly narrowed:

• The S&P 500 index fell by 0.2%, the Dow remained flat, and the Nasdaq dropped by 0.26%. Tesla fell by 1.7%, Apple rose by 0.4%, and Nvidia still had a decline of about 5%.
• The yield on the U.S. 10-year Treasury bond reached a daily high of 4.5891% after the Powell press conference began, then retreated to around 4.54%. The two-year Treasury yield's increase narrowed to 2.7 basis points, approaching 4.22%, having reached a daily high of 4.2567% after the FOMC decision statement was released and before the Powell press conference began.
• Spot gold quickly rebounded from around $2,745 to approximately $2,758, with the overall intraday decline narrowing to 0.17%, close to $2,759.
• The ICE Dollar Index rose by 0.13%, reporting 108.010 points, increasing to 108.249 points after the press conference began, then retreating below 107.9 points. The decline in the emerging market currency index narrowed.
• Bitcoin rebounded to around $105,000, erasing all losses from Monday's DeepSeek plunge.

Powell also discussed the financial markets at the press conference, stating that the artificial intelligence (AI) sell-off that occurred earlier this week is unsustainable and unlikely to persist stubbornly. However, he also pointed out that, at this stage, asset prices appear high based on many indicators. By the close of U.S. stocks, Nvidia, despite falling over 4%, had significantly narrowed its decline from an intraday low of about 7%.

Major Asset Trend Charts

The chart below shows the trend of the S&P 500 index:

The chart below shows the trend of the 10-year U.S. Treasury yield:

The chart below shows the trend of gold:

The chart below shows the trend of the dollar:

The chart below shows the trend of Bitcoin: