Again and again, Powell slaps Trump in the face by saying "there's no rush to cut interest rates."

Source: Wall Street Journal

President Trump of the United States is disappointed again.

Despite repeatedly calling for interest rate cuts, the Federal Reserve chose to stay on the sidelines, did not lower rates, and also hinted that Trump's policies pose risks of stagflation.

Federal Reserve Chairman Powell reiterated after the meeting that the Fed is not in a hurry to act and does not believe it should preemptively cut interest rates to respond to tariff shocks, once again contradicting Trump.

Powell also stated that Trump's calls for interest rate cuts "will not affect our work at all," and he has never actively sought to meet with any president, nor will he in the future.

Nick Timiraos, known as the "New Federal Reserve News Agency," commented that Federal Reserve officials are considering whether the focus should be on the risks of employment or the risks of inflation.

Although the Federal Reserve remains on hold, Trump has made a move, planning to revoke the Biden administration's new regulations on AI chip export restrictions, boosting the major U.S. stock indexes to close higher, ending two consecutive declines, while the dollar index accelerated its rebound and gold further retreated.

01 Slapping Trump in the face, the Federal Reserve** once again pauses interest rate cuts**

On May 7, Wednesday, Eastern Time, the Federal Reserve announced after the Federal Open Market Committee (FOMC) meeting that the target range for the federal funds rate remains unchanged at 4.25% to 4.5%.

This is the Federal Reserve's decision to pause actions for the third consecutive monetary policy meeting. The Federal Reserve has cut interest rates at three consecutive meetings since September of last year, with a total reduction of 100 basis points, and has been on hold since Trump took office in January this year.

The resolution received full support from all FOMC voting members, unlike last time when one person opposed. The Federal Reserve stated that the uncertainty of the economic outlook has "further" increased, with the new statement "the risks of rising unemployment and rising inflation have increased"; it reiterated that recent indicators show economic activity is still expanding steadily, but noted that fluctuations in net exports have affected the data.

The Federal Reserve's decision to pause interest rate cuts was completely expected by the market. By the close on Tuesday, tools from the CME showed that the futures market expected a probability of over 95% that the Fed would keep rates unchanged this week, a probability of over 68% that there would be no rate cuts in June, and about a 77% chance of a rate cut in July. Before the Fed's decision is announced on Wednesday, pricing in the derivatives market shows that traders have reduced their bets on rate cuts, anticipating about three 25 basis point cuts starting in July this year.

02 Powell Refuses to Act Preemptively Due to Tariffs

Powell commented on the US economy, stating that the economy remains robust. The labor market is largely balanced, at or near full employment. Inflation growth has significantly slowed. Wage growth continues to trend moderately.

Powell stated that the current monetary policy is moderately restrictive, and the potential inflation outlook is good, the decision to wait is very clear; he mentioned that businesses, market participants, and forecasters are all waiting to see how things develop, insisting that "everyone is waiting." There can be no preemptive action because there is uncertainty on how to respond until more data is seen.

Powell said that Trump's calls for interest rate cuts "will not affect our work at all". He stated: "We will always do the same thing, which is to use our tools to promote maximum employment and price stability, benefiting the American people. We will always only consider economic data, prospects, and risk balance, and that's it. That's all we have to consider."

When asked why he had not met with Trump during his new presidential term, Powell replied: "I have never requested to meet with any president, nor will I ever."

Powell was asked which issue he believed needed to be addressed first during his term: unemployment or inflation.

Powell stated that the risks of rising unemployment and rising inflation are increasing. It is currently unclear which of these risks is more concerning. "It is still too early to draw conclusions." Powell believes that attention needs to be paid to both the risks of unemployment and inflation, and there may have to be a trade-off between the two.

When asked whether the Federal Reserve needs a long time to understand the developments, Powell emphasized: "I think we don't know." He also reiterated his previous comments, stating that the Federal Reserve will not rush to cut interest rates. He said:

"We believe that there is no need to rush to adjust interest rates."

"We believe we can be patient, and we will focus on the data."

At the same time, Powell emphasized that high tariffs could lead to increased unemployment and inflation.

"If the announced significant increase in tariffs continues, it may lead to rising inflation, slowing economic growth, and an increase in the unemployment rate."

When asked if the impact of tariffs has not yet arrived, he replied, "Not yet." "People are worried about inflation, worried about the impact of tariffs, but this impact has not yet arrived."

Powell believes that if Trump maintains high tariffs, the Federal Reserve's inflation and employment targets will not make progress at least for the next year. Negotiations may substantially change the trade situation, or they may not.

03 The Federal Reserve does not intervene, Trump takes action, U.S. stocks rebound

Although the Federal Reserve continues to hold steady, Trump has made a move.

According to the media, as part of efforts to amend semiconductor trade restrictions, the Trump administration plans to lift the artificial intelligence (AI) chip restrictions imposed during Biden's tenure. Subsequently, a spokesperson for the U.S. Department of Commerce confirmed the news.

After this news broke, chip stocks surged in the U.S. stock market during the last trading hours. The Philadelphia Semiconductor Index rose more than 2% at one point. Nvidia's late-session gain expanded to over 3%, hitting a new daily high, up 4.8% from its intraday low.

The news from the Federal Reserve and Trump dominated market sentiment, major U.S. stock indices fluctuated and closed higher, tariff news stimulated a late surge in chip stocks, while Google still fell against the trend.

• In the early trading of US stocks, driven by news of the upcoming China-US economic and trade talks, the three major US stock indices opened higher.
• In the morning session, Apple executives stated that they are brewing a major overhaul of Safari, targeting AI search, which poses a severe challenge to Google's search dominance. After that, Google briefly fell over 9%, Apple dropped over 2%, and the Nasdaq turned negative.
• In the U.S. stock market at noon, the Federal Reserve announced that it will not lower interest rates, and the rate decision statement added a sentence: "The risks of rising unemployment and rising inflation have increased." The risk of stagflation is present, and the three major U.S. stock indices have hit new daily lows.
• In the U.S. stock market's closing hours, Powell reassured the market by stating that the economy remains robust, refusing to act preemptively due to Trump's tariffs, and the S&P 500 turned from decline to rise, fluctuating upward. Reports indicate that Trump will revoke the new global AI chip export restrictions enacted during Biden's administration, and after the news broke, chip stocks surged in the closing hours, with Nvidia rising nearly 5% from its daily low.

On Wednesday, the three major U.S. stock indices closed higher, ending a two-day decline. Apple fell 1.14%, and Google dropped over 7%. After the earnings report, Disney rose nearly 11%, and AppLovin surged over 10% in after-hours trading. Arm, with disappointing guidance, fell over 10% in after-hours trading. The China concept index dropped over 2%.