Fed officials cautious about impact of credit rating downgrade and market volatility

From Yahoo Finance: 2025-05-19 09:51:00

Federal Reserve officials expressed caution about the impact of the U.S. government’s credit rating downgrade and market volatility. Moody’s lowered the credit rating due to concerns over deficits and interest costs, affecting borrowing costs and economic activity. The Trump administration’s trade policies also contribute to investor uncertainty and market instability.

Despite concerns, New York Fed President John Williams believes the U.S. remains an attractive place for investors. Minneapolis Fed President Neel Kashkari acknowledges uncertainty but stresses the importance of retaining investor confidence. The U.S. government bond market’s role as a safe haven is challenged by ongoing policy changes and debt issues.

Analysts note a shift in investor preferences following the ratings downgrade, impacting U.S. bonds and the dollar. While some expect minimal consequences from the downgrade, others see a decrease in the attractiveness of U.S. Treasuries. Fed officials maintain a wait-and-see approach to monetary policy, with focus on managing inflation and responding to economic conditions.



Read more at Yahoo Finance: Fed officials take cautious view on US markets amid downgrade