- Members of the FOMC kept interest rates unchanged in a range of 5.25% to 5.50% as they concluded their two-day policy meeting yesterday. The decision was expected, following several hot inflation reports which have reduced policymakers’ confidence that inflationary pressures are waning. At the start of the year markets were expecting up to seven rate cuts from the Fed in 2024, however recent data suggest that interest rates will continue to be held ‘higher for longer’. When asked when a rate cut could come Chairman Powell said, “I don’t know how long it’ll take,” adding, “I can just say that when we get that confidence then rate cuts will be in scope, and I don’t know exactly when that will be.” He did give markets some comfort, saying that it is unlikely that the next move in policy rates would be up. Saying that officials would need to see “persuasive evidence” that policy isn’t sufficiently restrictive to bring inflation down to their 2% target to consider raising rates again. A cut at the last policy meeting of the year in December is the current expectation, although both the FOMC and markets will need to continue to watch the data for signs of an earlier move.
- The US dollar slipped against most of its G10 peers after the Fed meeting, with the dollar index slipping 0.4%. GBPUSD is back on a 1.25 handle and EURUSD is back above 1.07 after slipping to a low of 1.0650 yesterday. The Japanese yen remains volatile, with a late surge in New York trading leading to some to speculate that Japanese officials has intervened for s second time this week. However, the rally was short lived with USDJPY paring most of the move.
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