Stocks, dollar calm as investors await US interest rate cut decision

Traders took a breather from the global rally that lifted several equity indexes to record highs over recent weeks, as they anticipate the Fed decision and post-meeting comments by Jerome Powell

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Stock markets and the dollar steadied as investors expected the US Federal Reserve to cut interest rates on Wednesday to shore up the world’s biggest economy.

The Dow rose at the opening bell on Wall Street, but the S&P 500 and Nasdaq Composite were flat.

In Europe, London and Frankfurt stocks rose in afternoon trading, while Paris dipped.

"The Fed meeting... is one of the most hotly anticipated for the year so far," said Kathleen Brooks, research director at XTB trading group.

While a 25-basis-point reduction - the first of 2025 - has been baked into valuations for some time, the main debate has revolved around how many more are in the pipeline and how big they will be.

"(Donald) Trump will be central to this meeting," Brooks said, citing the pressure the US president has put on the Powell and the Fed to cut rates.

Expectations for an extended period of easing have grown out of a string of data showing the US labour market is not as healthy as first thought.

That comes even as inflation remains stubbornly above the Fed's two-percent target, though the feared spike in prices caused by Trump's tariff war has not fully materialised.

Economists expect to see divisions among decision-makers as they try to walk the line between tempering inflation and supporting jobs.