20.03.202512:19 Forex Analysis & Reviews: US market rallies as Fed holds rates steady

S&P500

Overview for March 20

The US market rallied as the Fed left interest rates unchanged.

Key US indices on Wednesday: Dow: +0.9%, NASDAQ: +1.4%, S&P 500: +1.1% (S&P 500: 5,675, trading range: 5,500–6,000).

The US stock market saw gains midweek. Optimism was present at the start of trading, and buying interest increased following the FOMC decision at 2:00 PM ET and the subsequent press conference by Fed Chair Jerome Powell.

The major indices closed near their session highs after the Federal Open Market Committee unanimously decided to keep interest rates unchanged, maintaining the target range at 4.25%–4.50% following the vote.

Fed Governor Christopher Waller expressed dissent—not regarding the rate decision itself, but concerning the pace of balance sheet reduction. His proposal to maintain the current rate of Fed securities roll-off was rejected as the committee decided to slow the monthly sale of Treasury securities from $25 billion to $5 billion starting April 1, while keeping the mortgage-backed securities cap at $35 billion.

The committee's directive also acknowledged growing economic uncertainty, while reaffirming that the Fed remains attentive to both aspects of its dual mandate.

The latest Summary of Economic Projections (SEP) complicates the outlook.

The Fed lowered its GDP growth forecast for 2025 from 2.1% to 1.7%. At the same time, it raised its PCE inflation forecast from 2.5% to 2.7% (core PCE increased from 2.5% to 2.8%). Despite this, the median projection for the federal funds rate remained at 3.9%, implying expectations for two rate cuts this year.

Weaker growth estimates with persistent inflation projections suggest that the Fed is focusing on stubborn inflation rather than slowing growth.

During his press conference, Fed Chair Jerome Powell reiterated that there is no rush to adjust the Fed's policy stance. He cautioned that it would be very challenging to say with confidence how much inflation stems from tariffs versus other factors.

Powell suggested that the baseline scenario assumes tariff-driven inflationary pressures will be temporary, adding that the last time tariffs were introduced, the resulting price increases were also short-lived.

Large-cap stocks led the rally, rebounding after yesterday's decline. The Vanguard Mega Cap Growth ETF (MGK) closed 1.4% higher.

A sharp drop in bond yields also supported equities. The 10-year Treasury yield fell by 3 basis points to 4.26%. The 2-year Treasury yield dropped by 6 basis points to 3.98%.

Year-to-date performance:

Dow Jones Industrial Average: -1.4%, S&P 500: -3.5%, S&P Midcap 400: -4.4%, Russell 2000: -6.6%, Nasdaq Composite: -8.1%

Economic data overview:

Weekly MBA Mortgage Applications: -6.2% (previous: +11.2%)

EIA Crude Oil Inventories: +1.75M barrels (previous: +1.45M barrels)

Looking ahead to Thursday, market participants receive the following data:

8:30 AM ET:

• Initial Jobless Claims (Consensus: 220K; Previous: 220K)
• Continuing Jobless Claims (Previous: 1.87M)
• Q4 Current Account Balance (Consensus: -334.0B USD; Previous: -131.4B USD)
• Philadelphia Fed Index for March (Consensus: 10.0; Previous: 18.1)

• 10:00 AM ET:
  • Existing Home Sales for February (Consensus: 3.95M; Previous: 4.08M)
  • Leading Indicators for February (Consensus: -0.2%; Previous: -0.3%)
• 10:30 AM ET:
  • Weekly Natural Gas Inventories (Previous: -62B cubic feet)

Energy market: Brent crude: $71.10 – Oil has climbed back above $71, following improved sentiment in the US market.

Conclusion: The US market has signaled its intention to end the correction and start a new rally. However, there are doubts as to whether the S&P 500 index can break through the strong resistance level of 6,000 —but the probability of reaching this mark remains high. It makes sense to hold long positions from support levels at least until this target is reached.