- The US Federal Reserve raised interest rates by 75 basis points.
- AUD/USD hit new highs in reaction, and then fell towards the 50 one-hour SMA.
On Wednesday, the US Federal Reserve raised interest rates by 0.75%, not as market participants initially expected, as Federal Reserve Chairman Jerome Powell ruled out a hike of that magnitude. However, the article published on Monday about the possibility of the Fed raising rates by the magnitude mentioned turned out to be true. At the time of writing this article, the AUD/USD trades around the 0.6915-70 range in reaction to the Fed’s monetary policy meeting.
FOMC Monetary Policy Statement Summary
The FOMC declared its commitment to return inflation to the 2% target. They added that “inflation remains elevated, reflecting pandemic-related supply and demand imbalances, rising energy prices, and broader price pressures.”
As for the US economic outlook, the Fed noted that economic activity recovered after the negative reading in the first quarter. They added that the Fed would continue to reduce its holdings, so the Quantitative Tightening (QT) program began.
Also, at the same meeting, the Federal Reserve Open Market Committee released the Summary of Economic Projections (SEP), which showed that the Fed lowered its growth expectations from 2.8% to 1.7%, while the interest rate Unemployment would rise to 3.7% from the 3.5% forecast in March.
As for their outlook on inflation, Fed officials expect core PCE to come in at 4.3%, up from 4.1%, while the end-2022 fed funds rate is expected to come in at 3.4%, 150 basis points higher than the 1.9% expected in March.
It should be noted that the Federal Reserve expects another 50 basis point hike in 2023, with the first rate cut in 2024. However, contrary to what the Bank of England said at its last meeting, which cut growth into negative territory, the Fed seems optimistic.
AUD/USD 1 hour chart
Technical levels
Source: Fx Street
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