Dow Futures indicate a positive trajectory following the Federal Reserve’s anticipated interest rate cut, marking the first reduction since December. Chair Jerome Powell emphasizes the necessity of risk management in the future, with the central bank especially cautious regarding a faltering U.S. labor market. Further rate reductions are anticipated this year, although forecasts from Federal Reserve officials indicate that discussions surrounding these actions may be contentious. In other developments, the Bank of England is set to announce its latest rate decision, as gold experiences a decline from its recent historical highs.

Dow Futures were positioned higher on Thursday, as investors assessed the Fed rate cut and remarks regarding the outlook for monetary policy from Powell. As of 03:00, the Dow futures contract experienced an increase of 141 points, reflecting a rise of 0.3%. Additionally, futures saw a gain of 28 points, translating to a 0.4% increase, while Nasdaq 100 futures advanced by 149 points, corresponding to a 0.6% uptick. The primary indices concluded the trading session on Wednesday with divergent outcomes, as the blue-chip index experienced an uptick, whereas the benchmark S&P 500 and the technology-focused Nasdaq Composite both registered declines. Along with the Fed’s much-anticipated announcement, sentiment was swayed by shares, which dropped on a report that China’s internet regulator had barred large domestic tech companies from purchasing the semiconductor giant’s AI-optimized chips.

The Federal Reserve reduced interest rates as anticipated, lowering borrowing costs by a quarter point to a target range of 4% to 4.25%, while signaling the possibility of two additional cuts in October and December. Powell characterized the reduction as a method of “risk management,” as the central bank aims to navigate the dual challenges of a weakening labor market and persistent inflation. However, Powell emphasized that the recent weak jobs data is significantly influencing officials’ considerations, asserting that “downside risks to employment have risen.” An acceleration in inflation, conversely, was perceived as a more transient challenge. In theory, lower interest rates can stimulate investment and employment, though this comes with the potential downside of increasing inflationary pressures. Wednesday’s cut did not garner unanimous support from the rate-setting Federal Open Market Committee, as one member advocated for a more substantial, 50-basis point reduction. Stephen Miran, selected by President Donald Trump to occupy a vacant seat on the FOMC, was confirmed to the position just moments prior to the commencement of the Fed’s most recent two-day meeting. While the reduction aligned with Trump’s preferences, as he has consistently urged the Federal Reserve to expedite the lowering of borrowing costs to stimulate economic growth, the magnitude of the cut fell short of the president’s expectations. In addressing inquiries regarding the Federal Reserve’s autonomy, particularly in light of Trump’s distinct effort to remove Fed Governor Lisa Cook, Powell remarked that it is “deeply in our culture to do our work based on the incoming data and never consider anything else.”

The recent Fed meeting presented new projections indicating that officials expect an additional half percentage point in rate cuts by the conclusion of 2025. Should these developments materialize, borrowing costs would settle within a range of 3.5% to 3.75%—a reduction from the levels observed by policymakers during the last outlook published in June. Nonetheless, seven out of the 19 projections anticipate smaller reductions this year, with one even suggesting that rates may have remained within their previous range of 4.25% to 4.5%. This indicates that discussions may become heated as we approach the upcoming Federal Reserve meetings in October and December, particularly given that another official, believed to be Miran, has projected a significant decline in rates to a range of 2.75% to 3%. Analysts indicated that this would align with the Trump administration’s calls for a swift reduction in interest rates. Markets are currently assigning a probability of approximately 90% to a 25-basis point reduction in October, and an 84% likelihood to a comparable decrease in December. In the interim, the forecasts indicate that a majority of Federal Reserve policymakers anticipate an economic expansion of 1.6% for the current year, surpassing the projections made in June. The projected year-end unemployment rate stands at 4.5%, while the underlying inflation rate is anticipated to be 3.1%. Price increases are expected to remain above the Fed’s 2% target until 2028.

Attention now shifts to the Bank of England, which is poised to announce its interest rate decision on Thursday. In contrast to the Federal Reserve, the Bank of England is widely anticipated to maintain interest rates at 4% following last month’s cut, marking its fifth reduction since August 2024. Data released on Wednesday indicated that inflation in August remained at 3.8%, marking the highest level in 19 months and nearly double the Bank of England’s 2% target. This situation is likely to influence BoE policymakers to decide to maintain current interest rates this month as they seek evidence that underlying inflationary pressures from the labor market are indeed diminishing. In other developments, the Bank of Japan, which is scheduled to convene on Friday, is anticipated to maintain its current interest rates in light of increased political uncertainty.

Gold prices continued to decline during European trading, retreating from record highs as the U.S. dollar rebounded. Analysts noted that the Federal Reserve indicated a cautious stance regarding additional policy easing. In addition to the two anticipated rate cuts this year, only one further reduction is forecasted for 2026, highlighting a more measured approach from the central bank. Powell emphasized that decisions would be made on a meeting-by-meeting basis, indicating that a robust cycle of rate reductions may be improbable. Analysts noted that there is a prevailing skepticism in the market regarding the belief that three additional cuts will suffice to stimulate growth and rejuvenate the jobs market. Gold has reached unprecedented heights in recent weeks, propelled by anticipations of monetary easing that diminish the opportunity cost associated with holding non-yielding bullion, alongside geopolitical uncertainty and robust central bank acquisitions.