Forexlive Americas FX news wrap 28 May: FOMC meeting minutes less upbeat

The USD was mostly higher in trading today. Yields moved higher with the 2 and 10-year each up 4.3 basis points to 3.992% and 4.475% respecitively. The 30-year rose 3.3 basis points to 4.972%.

The economic calendar was light with the Richmond Fed index for May coming in at -9 vs -13 last month (expected -9). Although better, it is still in contractionary territory.

The minutes from the Federal Reserve’s May 6–7 meeting reveal that Fed staff now view a recession as “almost as likely” as their baseline forecast, marking a more cautious economic outlook than in March. The shift in tone reflects growing concerns over the effects of U.S. trade policy, particularly President Trump’s tariffs, which are expected to boost inflation in the near term and drag on productivity and GDP growth. Staff forecasts now show inflation not returning to the Fed’s 2% target until 2027, with unemployment projected to rise later this year and remain elevated through that same period. Real GDP growth for 2025 and 2026 is also expected to slow, widening the output gap and placing the economy in what some analysts are calling “stagflationary territory.”

Despite these concerns, Fed officials held the federal funds rate steady at 4.25%–4.50%, citing heightened uncertainty and the need to assess the full impact of evolving government policies. Policymakers acknowledged that they may face difficult trade-offs if inflation proves more persistent while growth and employment weaken. Fed Chair Jerome Powell has previously noted that tariffs could complicate efforts to restore price stability. Notably, there was no internal dissent over the decision to keep rates unchanged—something that surprised market participants expecting more pushback given the current economic strain.

Officials also highlighted recent financial market volatility, including a sharp rise in long-term Treasury yields, falling stock prices, and a weaker dollar in April. Some warned that if U.S. assets are increasingly perceived as less of a safe haven, the shift could have lasting implications for financial stability and economic growth. While the Fed minutes did not address the topic of central bank independence—despite past criticism of Powell by President Trump—they underscore the delicate position the central bank faces as it tries to balance inflation control with rising economic and political uncertainty.

Markets, meanwhile, continue to price in two rate cuts for the second half of the year, a stance that was unchanged by the release of these minutes. Although the near-term policy outlook remains steady, the Fed’s evolving forecasts and the intensifying impact of trade policy suggest that the central bank’s path ahead could become increasingly complex and politically fraught.

Stocks fell modestly but closed near lows of the day ahead of Nvidia and Salesforce earnings. Both beat expectations but Salesforce shares area trading down modestly by -0.35%. Nvidia shares are higher by 3.75%.

The final numbers for the major indices are showing;

• Dow Industrial average -244.95 points or -0.58% at 42098.70.
• S&P index fell -32.99 points or -0.56% at 5888.55
• Nasdaq fell -98.22 points or -0.51% at 19100.94.

In other markets:

• Crude oil rose $0.92 or 1.53% at $61.82
• Gold fell -$6.59 at $3294
• Bitcoin is trading at $107,383