US stock indices rose on Wednesday after a volatile session as investors assess the Federal Reserve’s policy statements and upcoming US-China trade talks.
In a step that wasn’t surprising, the Fed decided to maintain interest rates unchanged at below 4.5%, due to ongoing economic uncertainty.
The statements asserted the FOMC continues to monitor risks closely, and believes that unemployment and higher inflation risks are on the upside.
The statement hinted that tariffs threaten higher prices and could slow growth, which opens the door to the scenario of inflationary recession.
Most Fed policymakers believe the central bank is in a good position to hold off modifying policies until clear data presents itself.
The Fed’s decision comes as the US administration engages in intense talks with trade partners to reach deals within the 90-day pause on reciprocal tariffs that Trump provided.
Recent data painted a worrying picture, with GDP contracting by 0.3% in the third quarter as imports surged with consumer and government spending reduced.
However, employment continued to grow strongly with the economy adding 177 thousand new jobs in April, while unemployment held at 4.2%.
On inflation, it continues to approach the Fed’s 2% target, but the tariffs could lead to a transient rise in prices.
On the trade front, the markets were boosted by reports about a meeting between US Treasury Secretary Scott Bessent and Chinese officials in Switzerland to discuss the tariffs and a potential trade agreement.
On trading, Dow Jones rose 0.7%, or 285 points to 41,114 points, with a session-high at 41,266.
S&P 500 rose 0.4%, or 24 points to 5631 points.
NASDAQ added 0.3%, or 48 points to 17,738 points, with a session-high at 17,820.
