U.S. stocks retreated as investors reacted to the latest Federal Reserve policy announcement and commentary from Chair Jerome Powell, who refrained from mentioning any imminent interest rate cuts. The Dow Jones Industrial Average and S&P 500 both ended lower after the Fed decided to hold its benchmark interest rate steady for the fifth consecutive meeting, maintaining the current range of 4.25% to 4.5%.

This policy stance aligns with Wall Street’s expectations, as many analysts anticipated a continuation of the Fed’s cautious approach. Despite prior rate cuts last year, Powell emphasized ongoing concerns about inflation and signaled that the central bank was not yet ready to shift toward easier monetary policy. The Fed stated it will require clearer, consistent signals of inflation aligning with its 2% target before considering further action on rates.

The decision comes amid persistent economic crosscurrents. While the most recent GDP figures showed robust 3% growth in the second quarter, inflation remains slightly elevated at 2.7%—above the central bank’s comfort zone. Labor markets also remain resilient, supporting the Fed’s argument for patience.

Markets will now turn their attention to the next Federal Open Market Committee (FOMC) meeting in September, as August holds no scheduled gathering. Economists currently assign a higher probability of a rate cut later this year if inflation moderates. However, Powell’s focus on careful monitoring—especially with ongoing global uncertainties and the impact of U.S. policy changes—suggests the Fed is committed to a data-driven, gradual approach.

For investors, this means ongoing market volatility as participants recalibrate expectations for monetary policy and inflation’s trajectory. Traders and analysts alike will be closely scrutinizing upcoming economic data releases and Fed communications for any hint of a shift in the current stance.