The Federal Reserve ended its two-day meeting today, making no changes to its monetary policy — a move that surprised no one. The US dollar rallied after the event even though the Fed’s policy statement could not be called particularly hawkish.
The Fed talked in the statement about moderate pace of economic growth. Regarding timing of the long-anticipated interest rate hike, the report did not give a specific data but rather said:
The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.
While it looks like the US central bank is not in a hurry to start monetary tightening, some analysts speculated that the optimistic outlook for the labor market means that a September rate lift-off is still possible. Indeed, the wording regarding employment was rather positive:
The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that underutilization of labor resources has diminished since early this year.
Whatever the case, the dollar reacted to the news very favorably. Or rather the currency dipped after the announcement but bounced almost immediately and is now trading firmly above the opening level.
EUR/USD declined from 1.1058 to 1.0979 as of 19:42 GMT today. GBP/USD slid from 1.5612 to 1.5602, reversing the earlier rally to the high of 1.5689. USD/JPY gained from 123.55 to 123.93.
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