- The Federal Reserve is expected to maintain the policy rate without changes for the fourth consecutive meeting.
- The review of revised economic projections, which includes the points graph, could offer key clues about policy perspectives.
- The US dollar could gain strength if those responsible for the policy project a single rate cut in 2025.
The United States Federal Reserve (USA) will announce monetary policy decisions and publish the Summary of Economic Projections (SEP) reviewed, The so -called points graphicsafter the June policy meeting on Wednesday.
Market participants widely anticipate that The US Central Bank will maintain unchanged policy adjustments By fourth consecutive meeting, after cutting the interest rate at 25 basic points (BPS) to the range of 4.25% -4.50% in December.
CME’s Fedwatch tool shows that Investors practically do not see the possibility of a rate cut in Junewhile they value approximately 15% probability of a 25 BPS reduction in July.
The chances of the FED opting for the first rate reduction of the year in September are currently maintained around 70%. Therefore, The projections reviewed in the points chart and the comments of the president of the Fed, Jerome Powell at the press conference after the meeting They could provide key clues on the moment and the number of rate cuts.
In Marchthe SEP showed that those responsible for the policy projected a total reduction of 50 bps in the policy rate in 2025while predicting a growth of the Gross Domestic Product (GDP) of 1.7% and an inflation of 2.8% in the Personal Consumption Price Index (PCE) for the year.
Before the Fed entered the period of silence, Several responsible for politics reiterated the need to maintain patience and evaluate economic developments before deciding on the next policy step.
The president of the Fed of Minneapolis, Neel Kashkari, said that the labor market is showing some signs of deceleration, but pointed out that the Central Bank must remain in waiting mode to see how the economy responds to uncertainty. Similarly, the president of the Fed of Philadelphia, Patrick Harker, said they still have no idea how changing economic policies will affect the perspectives and said they need to wait while the economy faces many different possible paths.
Previous May meeting of the Fed, TD Securities analysts said: “It is widely expected that the FOMC maintain the rates unchanged by the fourth consecutive meeting next week. As the uncertainty about economic perspectives remains high, we hope that FOMC maintains patience with respect to its upcoming politics decisions.”
“The SEP reviewed will probably show a lower growth, higher unemployment and higher inflation forecasts. We do not expect a change in the middle points,” the analysts added.
When will the Fed announce your decision on the interest rate and how could it affect the EUR/USD?
The US Federal Reserve is scheduled to announce its Decision on the interest rate and publish the monetary policy statement, together with the point graph review, Wednesday At 18:00 GMT. This will be followed by The press conference of the president of the FED, Jerome Powell which will begin with 18:30 GMT.
In case The SEP reviewed shows that Those responsible for politics still expect a total reduction of 50 BPS In interest rates this year, The USD could be under renewed sales pressure With the immediate reaction. A downward revision of GDP growth and/or inflation forecasts could intensify the mass sale of the USD.
On the contrary, The USD could gain strength Against their rivals If the points chart highlights that officials now anticipate only one rate cut This year. Investors currently value approximately 70% probability that the FED reduces the policy rate at least twice in 2025. This market position suggests that The USD has a strong bullish potential in case of a hard line surprise.
President Powell’s comments could further influence the USD assessment. In case Powell adopts an optimistic tone about inflation and suggest that they could change their approach to the labor market, The USD will probably have difficulties To overcome their rivals. On the contrary, the currency could maintain its position if Powell reiterates the need for a patient posture, citing the high uncertainty surrounding the state of the economy in the near future.
Eren Sengezer, leading analyst of the European session at FXSTERET, provides a short -term technical perspective for the EUR/USD:
“The short -term technical perspective suggests that the bullish inclination remains intact, with the relative force index indicator (RSI) in the daily graphic keeping comfortably above 60. In addition, the EUR/USD is negotiated well above the simple 20 -day mobile average, currently located in 1,1420”
“In the lower part, the midpoint of the four-month ascending regression channel forms the immediate resistance level in 1,1630. In the event that the EUR/USD rises above this level and confirms it as support, it could face the following resistance in 1,1800 (static level, round level) before pointing to 1,1900-1.1910 (round level, upper limit of the ascending channel). Looking to the south They could be found in 1,1420 (20 days SMA), 1,1330 (50 -day SMA, lower limit of the ascending channel) and 1,0980 (100 -day SMA). “
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.
