Fed Holds Rates Steady for the Second Time This Year, Maintains Forecast for Two Rate Cuts in 2024

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On Wednesday (March 19), the Federal Reserve announced it would keep its benchmark interest rate unchanged, maintaining a range of 4.25% to 4.50% for the second consecutive decision this year. During the meeting, Fed Chair Jerome Powell emphasized the high level of uncertainty in the U.S. economy. The official statement removed the previous language indicating that the risks to achieving employment and inflation goals were "broadly balanced." Furthermore, Fed officials showed increasing divergence in their views on rate cuts: out of 19 officials, four believe there should be no cuts this year, four support one cut, nine expect two cuts, and two favor three cuts. Additionally, some hawkish members have turned dovish, while some dovish members have shifted toward a more hawkish stance. Analysts believe the meeting conveyed that the Fed sees Trump’s policies as a significant factor influencing future rate decisions. Despite these uncertainties, the Fed maintained its forecast for two rate cuts this year, which fueled a broad rally in U.S. equities. The Dow Jones Industrial Average surged by more than 380 points, while the Nasdaq and S&P 500 each rose by more than 1%. However, concerns over Trump’s tariff policies and the upcoming "triple witching" event on Friday led to market pullbacks on Thursday and Friday, preventing the rally from extending further.  

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Steel Tariffs Unlikely to Provide Immediate Support, Industry Optimistic About Recovery in the Second Half of the Year

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Last week, Trump threatened to increase tariffs on Canadian steel and aluminum to 50% in retaliation for Ontario’s 25% surcharge on electricity exports to three U.S. states. However, after Ontario's Premier agreed to suspend the surcharge, Trump decided to maintain the current tariff levels but stated that steel and aluminum products would not receive the same grace period as other goods. Throughout his campaign, Trump has repeatedly emphasized the decline of the U.S. steel and aluminum industries due to foreign competition, particularly the threat posed by China's overcapacity. Consequently, his latest trade action includes a 25% tariff on steel and aluminum to protect domestic producers.  

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Meanwhile, according to a Reuters report on March 19, the European Union will reduce steel imports by 15% starting in April to prevent the U.S. from dumping cheap steel into European markets. Additionally, the earnings forecasts released this week by major U.S. steel producers—Nucor, U.S. Steel, and Steel Dynamics—fell short of market expectations. The main reason cited was that finished steel prices remain low, continuing to squeeze profit margins. While the steel industry remains cautious about short-term prospects, industry leaders remain optimistic that steel tariffs will help stabilize the market in the second half of the year.  

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China May Limit Exports to Counter Trump’s Tariff Measures, Following Japan’s 1980s Strategy

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In response to Trump’s aggressive tariff hikes, *The Wall Street Journal* reported that China may follow Japan’s 1980s strategy by voluntarily restricting exports of certain products, such as electric vehicles and batteries, to the U.S. in an attempt to mitigate broader economic shocks. In the 1980s, Japan voluntarily limited car exports to the U.S., partly to increase selling prices. However, experts suggest that Trump’s primary goal with the tariffs is to generate revenue, and since many Chinese goods are shipped to the U.S. through third countries like Vietnam, the effectiveness of negotiations remains uncertain.  

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Meanwhile, U.S. restrictions on Chinese semiconductor access remain in place. On Tuesday, U.S. Secretary of Commerce Howard Lutnick reaffirmed that DeepSeek had improperly used American-made chips and emphasized that the U.S. will continue efforts to prevent China from acquiring American semiconductor technology.  

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BoJ Holds Rates Steady, Yen and Nikkei React Mildly

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On Wednesday (March 19), the Bank of Japan (BoJ) announced that it would keep interest rates unchanged at 0.5%. This decision was widely expected, given that the BoJ had just raised rates for the first time in 17 years the previous month, and the economic outlook remains uncertain. However, on Friday (March 21), Japan’s Consumer Price Index (CPI) data was released, showing a year-over-year increase of 3%, surpassing both the forecast of 2.9% and the BoJ’s 2% target. Additionally, the results of Japan’s annual spring wage negotiations (*Shunto*), released last Friday (March 14), indicated the largest wage increase in 34 years. These developments have strengthened market expectations that the BoJ will continue raising interest rates this year.  

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Following the BoJ’s policy announcement, the yen remained stable at around 149.35 per U.S. dollar, while the Nikkei 225 index rose 0.69%.