Fed minutes: more rate rises needed in the US?
The minutes of the last Federal Reserve (Fed) rate meeting, in September, show that there were a wide variety of views on whether more rate rises would be needed. That meeting saw the Fed leave rates on hold.
The balance indicated that one more hike would be likely, but while there were conflicting opinions on the need for more policy tightening, there was unanimity on one point: that rates would need to stay elevated until policymakers are convinced inflation is heading back to 2%.
(AI Video Transcript)
The Federal Reserve
The Federal Reserve recently released the minutes of their last meeting, where policymakers discussed the need for future interest rate increases. Basically, they couldn't quite agree on whether more rate hikes were necessary or not. However, they all agreed to proceed with caution and base their decisions on upcoming data instead of following a set plan.
The US dollar
As a result of this meeting, the USD went through some ups and downs. Initially, it went up, but then it dropped to its lowest point in three weeks. This happened because the dot plot, which represents the expected trajectory of interest rates, showed that two-thirds of the voting committee believed that one more rate hike would be needed by the end of the year. In fact, the Federal Reserve has already increased interest rates 11 times since March 2022, which is the highest level in over two decades.
Interestingly, some members of the voting committee think that the recent appreciation of the US dollar could actually help control inflation. This suggests that more rate hikes may not be necessary, which could explain why the dollar has been falling in recent weeks.
The euro-dollar trade
In terms of the EUR/USD trade, the euro has been getting stronger compared to the weakening US dollar. It's getting close to a resistance level of 106.35, and if it breaks through that level, it could mean even more gains for the euro. With the US dollar losing value, the euro is looking more and more attractive in comparison. So, in a nutshell, the Federal Reserve's meeting revealed some differences in opinions about interest rate increases. The US dollar has been going through some ups and downs as a result, while the euro has been getting stronger.
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