US dollar rises after Fed’s hawkish rate pause
The US dollar rose after the US Federal Reserve kept its interest rates in the current 5.25%-5.50% range on Wednesday night and chair, Jerome Powell, delivered his firm hawkish stance - higher for longer.
Updated quarterly projections show the central bank may still lift rates one more time this year to a peak 5.50%-5.75% range. Policymakers now see the fight against inflation lasting into 2026. IGTV’s Angela Barnes has more.
The Federal Reserve
The Federal Reserve announced that they would be keeping interest rates in the U.S. unchanged at a range of 5.25 to 5.50 percent. This decision had a big impact on the value of the U.S. dollar. One interesting thing to note is that Jerome Powell, who heads the Federal Reserve, took a firm stance on raising rates, which caused the value of the dollar to go up. The Federal Reserve also released their updated projections, which suggest that there may be one more rate hike this year, bringing the rate to a range of 5.50 to 5.75 percent.
U.S. inflation
They also predict a half percentage rate cut in 2020-24, which is different from their previous expectation of a one percent cut next year. The Fed officials believe that they can continue to fight inflation until 2026 without causing any harm to the economy. As a result of these announcements, bond yields, which are the returns on bonds, increased. The two-year Treasury note even reached a level not seen in 17 years. This caused a decline in the equity markets, as investors moved their money into bonds.
The U.S. dollar
At the same time, the USD became stronger and reached a six-month high. This had an impact on the dollar-yen exchange rate, which reached its highest level in 2023. Overall, these developments indicate that the U.S. dollar is doing well and is expected to continue to strengthen. This is important for traders to keep an eye on, as it can impact the value of other currencies and international trade. It will be interesting to see how the markets react in the coming days.
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