Market update - June 20, 2025

Federal Reserve stance and market outlook post-June FOMC meeting

The June Federal Open Market Committee (FOMC) meeting concluded with Federal Reserve Chair Jerome Powell successfully maintaining market calm and avoiding surprises. The Fed held interest rates steady for the fourth consecutive time, reinforcing its cautious approach amid ongoing economic and geopolitical uncertainties. Powell emphasized the need to “hold and learn more,” signaling the Fed’s intention to wait for clearer evidence on how tariffs, inflation, and consumer behavior evolve over the coming months.

A key focus during the post-meeting press conference was the internal division within the committee, as reflected in the dot plot and economic projections. There remains significant disagreement over the appropriate policy path, driven by diverging economic forecasts and differing interpretations of inflationary risks. The updated Summary of Economic Projections (SEP) suggests only one rate cut in 2025, reflecting ongoing debate about whether tariff-induced inflation should be treated as transitory or tackled more assertively.

Despite signs of economic softening, Powell maintained a relatively optimistic tone, particularly regarding the labor market. He acknowledged risks in housing and consumer sentiment but noted that job creation remains solid, wage growth is healthy, and the unemployment rate holds at a manageable 4.2%. While the Fed remains alert to signs of further deterioration, it is not yet inclined to act preemptively.

One topic that generated significant market interest was the regulatory outlook for the Supplementary Leverage Ratio (SLR). Powell downplayed its immediate implications, suggesting that any easing would likely be marginal and insufficient to materially affect bank behavior or Treasury market absorption capacity.

Economic Data and Consumer BehavioR

The June 18 retail sales report marked the weakest reading since 2023, with notable declines in food services and beverages, often seen as a proxy for services consumption, raising concerns about broader consumer spending trends. While online retail remained resilient, the gains likely reflected discount-driven activity rather than robust demand. Still, the control group and three-month trend offered a steadier picture, helping to explain the muted market reaction.

Caution is building as signs of consumer pullback in discretionary services accumulate, aligning with soft patches in recent CPI prints and labor market data. The Fed is monitoring these trends but remains in a wait-and-see stance, unwilling to pivot policy without firmer evidence of systemic weakness.

Global Backdrop: Oil, Iran, and Crypto Developments

Tensions with Iran, including rhetoric from the Trump administration, contributed to risk market jitters and a short-term correction in Bitcoin. In energy markets, the International Energy Agency (IEA) issued a bearish outlook, forecasting a slowdown in oil demand due to economic headwinds, rising EV adoption, and modest growth in non-OECD nations. Meanwhile, OPEC+ output dynamics and potential supply surpluses into 2026 may keep oil prices under pressure.

On the crypto front, a bipartisan Senate vote (68–30) passed a Trump-supported stablecoin bill. This landmark legislation requires stablecoin issuers to hold 1:1 dollar reserves, signaling greater regulatory clarity and potentially accelerating mainstream adoption. The House must now decide whether to advance the bill or expand it into a broader crypto framework. Key concerns remain around consumer protections and systemic risk, alongside political scrutiny of Trump’s ties to the sector.

Resilience in Digital Asset Investing

Despite macroeconomic and geopolitical headwinds, the crypto investment landscape—particularly for Bitcoin and Ethereum—has shown notable resilience.

This week alone, both assets saw continued inflows: US$129 million into Ethereum and over US$1 billion into Bitcoin, underscoring investor confidence in the long-term viability of digital assets even amid uncertainty.