The Morning Edge: Fed Holds Rates, Signals Cuts Ahead as Trump Slams Powell

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Global Sentiment: Risk-off
Factors: Israel-Iran conflict, Fed Powell Comments 

TODAY’S WATCHLIST
 - Bank of England interest rate decision
 - ECB President Lagarde Speech

THE BIG STORY
The Federal Reserve held interest rates steady on Wednesday, maintaining its target range at 4.25% to 4.50%, while signalling two potential cuts later this year. Federal Reserve Chair Jerome Powell expressed caution, indicating that forthcoming inflation partially influenced by tariffs imposed by the Trump administration could present challenges for the economic forecast. “No one holds these rate paths with a great deal of conviction,” Powell said, underscoring that any move would be “data dependent” as growth slows and inflation edges higher.

Meanwhile, President Donald Trump lashed out at Powell for not cutting rates, even joking about appointing himself as Fed Chair. The president’s outburst came as tensions with Iran escalated sharply. Despite six days of Israeli airstrikes and demands for Iran’s unconditional surrender, Iranian Supreme Leader Ayatollah Khamenei has refused to back down. With explosions reported over Tel Aviv overnight and Trump warning that his patience is running thin, markets are bracing for volatility on both monetary and geopolitical fronts. 

DATA
US Initial jobless claims fell by 5,000 to a seasonally adjusted 245,000 for the week ending June 14 but remained elevated enough to suggest continued labour market cooling. The prior week's figure was revised higher to an eight-month peak, highlighting persistent layoff activity amid ongoing tariff-related uncertainty and slowing economic growth. The data coincides with the reference period for June’s employment survey, pointing to subdued momentum after May's modest 139,000 nonfarm payroll gain. Meanwhile, separate Commerce Department data showed single-family housing permits dropped 2.7% to a 13-month low, as higher interest rates kept buyers on the sidelines and pushed unsold inventory to levels not seen since 2007.

WHAT HAPPENED OVERNIGHT
US stocks ended nearly unchanged on Wednesday after Federal Reserve Chair Jerome Powell said inflation in goods is likely to rise over the summer due to the delayed impact of President Donald Trump’s tariffs. The Fed held interest rates steady as expected and maintained its projection for two cuts this year, though a growing minority of policymakers foresee no cuts at all. Investor sentiment was mixed following the announcement, with stocks losing momentum late in the session. Shares of Circle Internet jumped 33.8% after the Senate passed a bill to regulate stablecoins. Steelmaker Nucor climbed 3.3% after issuing a better-than-expected second-quarter profit forecast.

US Treasury yields ended flat on Wednesday, with the 10-year yield unchanged at 4.391% after earlier declines were reversed following Fed Chair Jerome Powell’s warning of rising goods inflation. Safe-haven buying had pushed yields lower earlier in the day amid concerns of a potential US involvement in the Israel-Iran conflict. 

The US dollar strengthened against most major currencies on Wednesday, though it remained softer versus the yen, as the Federal Reserve held interest rates steady and flagged tariff-driven inflation as a growing concern. The dollar index edged up to around 98.9 after paring early losses, buoyed by Fed Chair Jerome Powell’s comments warning of a meaningful rise in goods prices due to President Trump’s tariffs. 

Brent crude oil prices ended slightly higher on Wednesday in a choppy session, as investors weighed the risk of supply disruptions from the ongoing Iran-Israel conflict and the potential for direct US involvement. Brent crude rose 25 cents to settle at $76.70 a barrel, while US West Texas Intermediate crude gained 30 cents to $75.14. Prices had fallen by as much as 2% earlier in the session, before recovering on geopolitical concerns. 

Day’s Ledger

Economic Data:

• New Zealand March Quarter GDP data
• Australia May employment data

Corporate Actions

• Jan-Mar earnings: Aegis Vopak Terminals, Aegis Logistics
• Indian Infotech to consider right issue 
• Infibeam Avenues to consider right issue 
• Kellton Tech to consider fund raising 
• Nexus Select to consider fund raising
• Thirumalai Chemicals to consider fund raising 

Policy Events

• Bank of England interest rate decision
• ECB President Lagarde Speech
• ECB Buch Speech
• ECB Guindos Speech

TICKERS

• Bajaj Auto promoter Sanjivnayan Bajaj sold shares worth ₹102.36 million via block deal to group entity Bachhraj and Co.
• HDFC Bank CEO Sashidhar Jagdishan moved Bombay High Court to quash FIR in Lilavati Hospital case and sought stay on investigation.
• HDFC Bank HR Chief Human Resource Officer Vinay Razdan resigned with effect from Wednesday; no reason cited.
• Hero MotoCorp launched battery subscription model for VIDA EVs to lower upfront cost; detailed plans to be announced on Jul. 1.
• Infosys partnered with Adobe to deliver AI-powered marketing services using Infosys Aster and Adobe’s tech stack.
• Jio Financial acquired SBI’s stake in Jio Payments Bank for ₹1.05 billion; now a wholly-owned subsidiary.
• Samvardhana Motherson received ‘AAA’ rating with stable outlook from three agencies for ₹25-billion NCDs citing scale, liquidity, and global presence.
• Siemens subsidiary Siemens Energy India to list on BSE and NSE from Thursday; shareholders to get one share for each held in Siemens.
• Tata Elxsi signed MoU with Infineon to jointly develop EV components for India including inverters, battery systems, and thermal solutions.
• Tata Teleservices penalised ₹38.13 million by DoT over subscriber verification lapses; company is reviewing demand.
• Vodafone Idea tied up with AST SpaceMobile to launch satellite-based broadband for smartphones in India without special hardware.
• Zydus received two US FDA observations for Ahmedabad oncology unit; no data integrity issues raised.

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