- The US dollar received an impulse in an environment of risk aversion on Wednesday after the president of the FED, Powell, modeled the expectations of feat cuts.
- Citing the slow effects on price volatility due to tariffs, Powell warned that Fed will continue to monitor the data.
- The hopes of feat cuts have decreased after the call of Fed fees, the operators now wait for a cut in October.
The US dollar received an offer on Wednesday, going up after the president of the Federal Reserve (Fed), Jerome Powell, warned that it is unlikely that the FED reduces interest rates unless the Central Bank of the United States obtains firm evidence that inflation will continue to decrease, and not increasing due to the effects of tariffs.
The president of the Fed, Powell, moderated the expectations of immediate cuts of fees, pointing out that despite the progress that the Fed has achieved in inflation until now, persistent price problems still persist. Those responsible for the FED monetary policy are prepared to wait for two additional rounds of inflation and labor data before making a final decision on a feat cut in September, cooling the hopes of the market of a short -term cut.
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US interest rates – Frequently asked questions
Financial institutions charge interest rates on loans to borrowers and pay them as interest to savers and depositors. They influence the basic types of interest, which are set by central banks based on the evolution of the economy. Normally, central banks have the mandate to guarantee the stability of prices, which in most cases means setting as an objective an underlying inflation rate around 2%.
If inflation falls below the objective, the Central Bank can cut the basic types of interest, in order to stimulate credit and boost the economy. If inflation increases substantially above 2%, the Central Bank usually rises the interest rates of basic loans to try to reduce inflation.
In general, higher interest rates contribute to reinforce the currency of a country, since they make it a more attractive place for world investors to park their money.
The highest interest rates influence the price of gold because they increase the opportunity cost of maintaining gold instead of investing in an asset that accrues interest or depositing effective in the bank.
If interest rates are high, the price of the US dollar (USD) usually rises and, as gold quotes in dollars, the price of low gold.
The federal funds rate is the type to a day that US banks lend each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set at a fork, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the aforementioned figure.
Market expectations on the interest rate of the Federal Reserve funds are followed by the Fedwatch of the CME tool, which determines the behavior of many financial markets in the forecast of future monetary policy decisions of the Federal Reserve.
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.
