Key Takeaways
- The Federal Reserve maintained its benchmark interest rate in the 4.25-4.50% range, citing elevated economic uncertainty and moderated growth in the first half of 2025, despite persistent pressure from President Trump to cut rates.
- President Trump signed a proclamation imposing universal 50% tariffs on imports of semi-finished copper products and copper-intensive derivative products, effective August 1. This move, driven by national security concerns, could lead to higher prices for various goods.
- The S&P 500 (SPX) dropped sharply after the Fed's decision, snapping a six-day winning streak, while gold prices remained steady, trading around $3,303.01/oz post-Fed announcement.
- The U.S. economy grew at a stronger-than-expected 3% annual rate in the second quarter, rebounding from a contraction in the first quarter, largely due to a sharp drop in imports.
Financial markets experienced a mixed reaction today as the Federal Reserve announced its decision to hold interest rates steady, while the White House unveiled new tariffs on copper imports. The Federal Open Market Committee (FOMC) kept the key overnight interest rate within the 4.25-4.50% range, a move widely anticipated by economists despite President Trump's repeated calls for rate reductions. The Fed noted that uncertainty about the economic outlook remains elevated and that economic activity growth moderated in the first half of 2025, with inflation remaining somewhat elevated.
Simultaneously, President Trump signed a proclamation to address the effects of copper imports on America's national security. Effective August 1, this proclamation imposes universal 50% tariffs on imports of semi-finished copper products and copper-intensive derivative products. The administration asserts that copper is critical for national security applications, including semiconductors, aircraft, and missile defense systems. Experts warn that these tariffs could lead to higher prices for a wide range of goods, from appliances and electric vehicles to home repairs. The U.S. relies on imports for approximately 45% of its annual copper consumption, with the majority coming from allies like Chile, Canada, Mexico, and Peru.
Following the Fed's announcement, the S&P 500 (SPX) dropped sharply, ending a six-day winning streak. The Dow Jones Industrial Average (DJI) also saw a slight dip, while the Nasdaq Composite (IXIC) posted modest gains. Market participants are now closely watching for further guidance from Fed Chair Jerome Powell on the economic outlook and the impact of tariffs.
In the commodities market, spot gold remained steady post-Fed decision, last down 0.7% at $3,303.01 per ounce. Gold prices have been range-bound between $3,300 and $3,330 as traders remain cautious ahead of key U.S. macro data and the Federal Reserve's forward guidance on potential rate cuts. Easing global trade tensions have somewhat dampened gold's safe-haven appeal, but uncertainty surrounding U.S.-China trade relations continues to offer some support.
Adding to the economic landscape, the U.S. economy grew at a 3% annual rate in the second quarter, exceeding expectations and marking a turnaround from a 0.5% contraction in the first quarter. This rebound was largely attributed to a significant drop in imports, which are deducted when calculating GDP. Despite this growth, some economists suggest underlying trends indicate a potential slowdown. President Trump also announced an additional 40% tariff on Brazil and a 25% tariff on Indian goods, with an extra penalty for India's trade with Russia, further highlighting ongoing global trade tensions.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.