Markets disliked the results of the FOMC meeting. HKMA followed the Fed and kept its rate unchanged.

The US stock market closed in negative territory, reacting to the results of the June FOMC meeting. By the end of the day, the Dow Jones Index (US30) fell by -0.98%. The S&P 500 Index (US500) declined by -1.21%. The technology Index Nasdaq (US100) closed lower by -1.34%. As expected, the Federal Reserve kept the federal funds rate at 3.50–3.75%, marking the fourth consecutive pause and the first decision under the leadership of the new chair, Kevin Warsh. The updated economic projections revealed a split within the regulator: nine officials allow for at least one rate hike before the end of the year, six expect at least two increases, and another nine anticipate maintaining or lowering rates. The Fed’s main macroeconomic concerns have shifted toward price pressures: the PCE inflation projection for 2026 was sharply raised from 2.7% to 3.6%, and the estimate for the following year was revised from 2.7% to 3.3%. The Fed leadership noted that the US economy continues to show resilient performance despite geopolitical uncertainty caused by the Middle East conflict. At the same time, the labor market remains balanced.

The new Fed chair also announced the creation of five working groups that will review virtually everything: how the Fed communicates with markets, what to do with the balance sheet, which data to use, and how to measure inflation and employment. The Fed will now actively seek new data sources, which could potentially lead to a new model of monetary policy formation. This factor likely frightened markets the most due to the uncertainty it introduces.
Against the backdrop of sharp sell‑offs and a collapse in US Treasury prices, the technology sector came under heavy pressure, particularly the “Magnificent Seven”: shares of Meta, Microsoft, Alphabet, and Amazon fell by more than 2%.

The Canadian dollar (CAD) weakened to around 1.41 per US dollar, fluctuating near a seven‑month low following the results of the latest Fed meeting. Although the US regulator kept interest rates unchanged as expected, the updated projections were perceived as hawkish, since about half of FOMC members allowed for another rate hike before the end of the year. This increased pressure on the Canadian currency in the pair with the US dollar.

European indices closed in the green yesterday. By the end of the day, Germany’s DAX (DE40) rose by +0.10%, France’s CAC 40 (FR40) closed down by -0.20%, Spain’s IBEX 35 (ES35) gained +1.35%, and the UK’s FTSE 100 (UK100) ended the session higher by +0.14%.

On Wednesday, silver prices (XAG) fell below 70 dollars per ounce, reacting to the results of the Fed meeting, which kept interest rates unchanged but hinted at a possible hike before year‑end. Pressure on precious metals intensified because half of the FOMC members supported further tightening amid expectations of persistently high core inflation and a stable labor market. Such hawkish projections triggered sell‑offs in the bond market, increasing the opportunity cost of holding non‑yielding metals in favor of fixed‑income securities.

On Wednesday, crude oil prices (WTI) rose by more than 1.5%, surpassing 77 dollars per barrel. The catalyst for the local rebound was a strong statement by US President Donald Trump, who warned of the possibility of resuming airstrikes on Iran if Tehran violates its commitments. This reintroduced uncertainty regarding the final ceasefire agreement, as the US leader emphasized that the signed memorandum is not the final step.

On Wednesday, Japan’s Nikkei 225 (JP225) rose sharply by +0.72%, China’s FTSE China A50 closed lower by -0.10%, Hong Kong’s Hang Seng (HK50) fell by -0.74%, and Australia’s ASX 200 (AU200) closed higher by +0.54%. In Asia, investors closely followed the final day of the Lujiazui Forum, where the People’s Bank of China (PBoC) announced a possible transition to using the overnight rate as the main monetary policy benchmark. Additional uncertainty came from Vice Premier He Lifeng’s statement that Beijing plans to introduce anti‑sanctions measures to counter foreign restrictions.

The Hong Kong Monetary Authority (HKMA) kept its base rate at 4.0%. This synchronicity is due to the linked exchange rate system, which pegs the Hong Kong dollar within the 7.75–7.85 range per US dollar and obliges the local regulator to mirror US monetary policy regardless of domestic economic conditions. Despite the high cost of borrowing, Hong Kong’s economy remains resilient: in Q1 2026, GDP growth accelerated to a nearly five‑year high of 5.9% year‑over‑year. The main drivers of the recovery were stable external trade and strong domestic demand, which helped businesses offset the negative effects of geopolitical tensions and logistics disruptions caused by the Middle East conflict.