- The Fed maintains stable rates, points patience in politics amid the growing inflation and occupational hazards.
- Jerome Powell highlights uncertainty, says that the path of fees still does not be clear.
- The US dollar index bounces 99.60 after falling after the decision.
The US dollar index is recovered to 99.60 while Powell adopts a cautious but balanced tone.
The US dollar index initially fell to 99.50 after the Federal Reserve left the fees without changes in 4.5%, citing persistent inflation and growing risks on both sides of its dual mandate. The policy declaration adopted a cautious tone, emphasizing that, although the labor market remains solid, uncertainty about economic perspectives has increased. The operators briefly valued up to three rate cuts for the year, but the conviction of the market weakened as the press conference was developed.
The president of the Fed, Jerome Powell, added nuances to the perspectives, stating that “he cannot say with confidence” what is the appropriate rate and that the Fed “is not in a situation in which we can cut in a preventive way.” He stressed the need for more data and emphasized patience, noting that the current political position is “modestly restrictive.” These balanced comments helped raise the dollar from their minimums, pushing the DXY again to 99.60 while the operators reassessed the probability of an imminent relief. The markets now look towards inflation and employment data to obtain more clarity.
Fed Faqs
The monetary policy of the United States is directed by the Federal Reserve (FED). The Fed has two mandates: to achieve prices stability and promote full employment. Its main tool to achieve these objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the objective of 2% set by the Federal Reserve, it rises interest rates, increasing the costs of loans throughout the economy. This translates into a strengthening of the US dollar (USD), since it makes the United States a more attractive place for international investors to place their money. When inflation falls below 2% or the unemployment rate is too high, the Federal Reserve can lower interest rates to foster indebtedness, which weighs on the green ticket.
The Federal Reserve (FED) celebrates eight meetings per year, in which the Federal Open Market Committee (FOMC) evaluates the economic situation and makes monetary policy decisions. The FOMC is made up of twelve officials of the Federal Reserve: the seven members of the Council of Governors, the president of the Bank of the Federal Reserve of New York and four of the eleven presidents of the regional banks of the Reserve, who exercise their positions for a year in a rotary form.
In extreme situations, the Federal Reserve can resort to a policy called Quantitative Easing (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non -standard policy measure used during crises or when inflation is extremely low. It was the weapon chosen by the Fed during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy high quality bonds of financial institutions. The one usually weakens the US dollar.
The quantitative hardening (QT) is the inverse process to the QE, for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the bonds that it has in portfolio that they expire, to buy new bonds. It is usually positive for the value of the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
