The Morning Edge: Fed Holds Rates Steady Amid Mounting Economic Crosscurrents from Trade Policies

QUICK SNAPSHOT
Global Sentiment: Risk-on
Factors:  FOMC outcome, Geopolitical tension

TODAY’S WATCHLIST
 - Bank of England interest rate decision
 - Earnings: L&T, Asian Paints, Titan 

THE BIG STORY 
The Federal Reserve maintained interest rates at 4.25%-4.50% on Wednesday but struck a newly cautious tone, acknowledging heightened risks of both rising inflation and unemployment as Trump administration tariffs distort economic signals. While the FOMC noted the economy continues to expand at a "solid pace," it attributed first quarter's weak output to import surges as businesses raced to beat new tariffs—a dynamic that has left policymakers in wait-and-see mode. Chair Jerome Powell underscored the unprecedented uncertainty, stating it's "not at all clear" whether the economy will sustain growth or buckle under trade-related pressures, leaving the Fed effectively sidelined until the fog of trade wars lifts.

Powell's admission that the Fed lacks clarity on how to respond marks a striking departure from the central bank's traditional role as economic stabilizer. With Trump's tariff policies simultaneously threatening to spike prices through import costs and curb employment via slower growth, the Fed faces a policy trilemma—unable to combat inflation without risking jobs or stimulate demand without fuelling prices. 

DATA
The US crude stocks fell by 2 million barrels last week, surpassing the 1.7-million-barrel draw forecast, leaving inventories 7% below the five-year seasonal average despite imports rising by 557,000 barrels per day to 6 million. The Strategic Petroleum Reserve saw a modest 0.6-million-barrel build to 399.1 million barrels as replenishment efforts continued. The data shows tightening commercial supplies even as the government gradually rebuilds emergency stockpiles.

WHAT HAPPENED OVERNIGHT 
US stocks ended higher Wednesday after a surge in semiconductor stocks after reports that the Trump administration plans to roll back curbs on AI chip exports. The PHLX Semiconductor Index rose 1.7%, reversing earlier losses, after Bloomberg reported the regulatory shift—later confirmed by a Commerce Department spokesperson., driven by reports the Trump administration will ease AI chip export curbs. Disney surged 10.8% on strong earnings, while Alphabet's drop weighed on the Nasdaq. 

US Treasury yields slipped on Wednesday after the Federal Reserve held interest rates steady, as widely expected. The benchmark 10-year note yield fell 4.9 basis points to 4.269%, while the 30-year bond yield dropped 4.1 basis points to 4.7718%. The 2-year note, which closely tracks Fed policy expectations, edged down 0.8 basis point to 3.781%.

The US dollar edged higher on Wednesday after the Federal Reserve kept interest rates unchanged, matching market expectations. The dollar index, which tracks the greenback against a basket of major currencies including the yen and the euro, rose 0.42% to 99.92. The euro slipped 0.62% to $1.1297, while the dollar strengthened 1.03% against the Japanese yen to 143.88.

Brent crude oil prices declined sharply on Wednesday, with Brent crude settling $1.03, or 1.66%, lower at $61.12 a barrel, and U.S. West Texas Intermediate falling $1.02, or 1.73%, to $58.07. The drop came as investors grew sceptical about any meaningful breakthrough from upcoming US-China trade talks, while easing concerns around a potential Iran-US nuclear deal helped temper supply fears.

Day’s Ledger
Economic Data

• Germany March Industrial Production Data
• US weekly Initial Jobless Claims

Corporate Actions

• Jan-Mar Earnings:  Larsen & Toubro, Asian Paints, Titan Company, Aarti Industries, Aditya Birla Real Estate, Bharat Forge, Biocon, Britannia Industries, Canara BankCeigall India, Chambal Fertilizers & Chemicals, D.B.Corp, DIC India, Dilip Buildcon, EPL, Escorts Kubota, GHCL, GTL Infrastructure, Hindustan Construction Company, IIFL Finance, Jindal Stainless, Kalyan Jewellers India, Kamdhenu Ventures, Maral Overseas, Medico Remedies, Muthoot Microfin, Pidilite Industries, R Systems International, Rain Industries, REC, Southern Petrochemicals Industries Corporation , Sula Vineyards, Suryoday Small Finance Bank, Union Bank of India, Vesuvius India, Zee Entertainment Enterprises,
• Bharat Bhushan to consider rights issue of equity shares.
• M&M Financial Services to consider rights issue of equity shares.
• Vaswani Industries Ltd to consider raising of fund.

Policy Events

• Bank of England interest rate decision
• BoJ Monetary Policy Meeting Minutes
• German Buba Balz Speaks

TICKERS

• APL Apollo March quarter profit jumps 72% on strong sales, better margins
• Coal India March quarter results: Profit up 12% at ₹95.93 bln, revenue drops slightly
• Dabur flags high cost, tight supply of recycled plastic as hurdle to compliance
• HUDCO sets ₹500-billion loan disbursal target for FY26, eyes ₹1.5-trillion loan book
• Mahindra & Mahindra's April vehicle output up 20% on year, down 3% on month
• NLC India forms green energy joint venture in Assam
• ONGC awards three-year rig contract to Jindal Drilling
• RBL Bank appoints Kumar Ashish to lead retail assets; strengthens retail team

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