Fed Decision Amid Global Tensions: Market Uncertainty Looms
As markets await the Federal Reserve's rate decision on Wednesday, uncertainty looms over the global economy, trade, and geopolitical tensions. The ongoing Israel-Iran air war, the G7 nations' struggle to find unity over the conflict in Ukraine, and signs of fragility in the U.S. economy have all contributed to a barrage of negative headlines that have left investors on edge. U.S. President Donald Trump's calls for Iran's unconditional surrender and his comments suggesting a more aggressive stance toward Iran have also stoked worries of greater U.S. involvement in the region. As a result, markets have taken on a risk-off tone, with shares in Asia falling and the dollar remaining buoyant. Stock futures in Europe similarly point to a mostly lower opening, though oil prices have stabilized after surging more than 4% in the previous session. The central bank's policy decision will be closely watched, particularly its updated Summary of Economic Projections, as it navigates the challenging global backdrop. For now, markets are still pricing in two Fed cuts by December, but this could change if Fed Chair Jerome Powell strikes a more hawkish tone later in the day. Additionally, UK inflation data is due on Wednesday, where consumer prices are expected to have slowed slightly in May after April's bigger-than-expected surge. This reading comes ahead of a policy decision by the Bank of England on Thursday, where expectations are for the central bank to keep rates on hold. However, investors will be looking for hints on whether a slowing economy and weaker wage growth could speed up the pace of easing. One of Britain's leading business groups has slashed its forecast for economic growth in 2025 and next year due to headwinds from Trump's tariffs and an increase in payroll taxes, a survey showed.
- The Federal Reserve rate decision
- UK CPI (May)
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