The Federal Reserve has rescued the market

Powell's "nonchalant" demeanor ignites the best "Federal Reserve decision day."

At Wednesday's Federal Reserve press conference, Powell appeared calm and composed when addressing the U.S. economic and inflation outlook. Media interpretations showed slight divergence, with MarketWatch considering his attitude to be "unhurried," while Bloomberg described his demeanor as "moderate" and "firm."

Driven by Powell's subtle stance, the U.S. market saw a rare simultaneous rise in stocks and bonds overnight. The S&P 500 and Nasdaq surged over 1%, with the S&P achieving its best performance on a "Federal Reserve decision day" since last July. The yield on the 2-year U.S. Treasury bond briefly plummeted over 10 basis points, while the yield on the 10-year U.S. Treasury bond fell over 4 basis points, hitting a daily low.

In summary, almost all asset classes recorded gains, except for the U.S. dollar.

Kathleen Brooks, research director at London-based XTB, commented that Powell's controversial reuse of the term "transitory" to describe expectations of inflation caused by tariffs indicates that he "seems to be deliberately trying to soothe financial markets":

"This is not Powell's 'whatever it takes' moment, but his indifferent attitude towards the risks to the U.S. economy has had a significant impact on market sentiment."

UBS analyzed that Powell's performance revealed signs of a "Powell put," suggesting that his policy stance is more dovish than the market expected.

In UBS's view, the Federal Reserve is currently more focused on economic growth than inflation risks, believing that excessive concern over tariff-induced inflation could unnecessarily negatively impact economic growth.

Concerns About Stagflation and Tariff Policies Persist

Regarding the economic and inflation outlook, the Federal Reserve simultaneously lowered its economic growth forecast while raising its inflation expectations, reigniting concerns about stagflation.

The Federal Reserve expects the inflation rate to rise from the current 2.5% to 2.7% by the end of the year, still well above the Fed's 2% target; it has downgraded this year's GDP growth forecast from 2.1% to 1.7%, significantly slowing compared to nearly 3% in 2022 and 2023.

CFRA Chief Investment Strategist Sam Stovall stated in a report that the FOMC's oscillation between stickier inflation and slowing growth is likely due to uncertainties surrounding future tariff policies, particularly the reciprocal tariff policy that the Trump administration plans to discuss on April 2.

"Stocks and bonds initially did not react to this news because the market realized that the 'contradictory' economic forecasts likely suggest that the Federal Reserve needs more clear information before adjusting monetary policy."At the meeting, Powell acknowledged that Trump's policy measures—including tariffs, immigration, fiscal policy, and deregulation—would have a significant impact on the economy, and emphasized that these effects have not yet been fully absorbed:

"The current uncertainty is exceptionally high, and we will have to observe how the situation actually develops."