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As expected, the Federal Reserve kept interest rates hanging at 4.25-4.50 % for the third consecutive meeting during their decision in May, noting the risks of uncertainty in trade and stagnation risks as reasons to stay cautious.
In their official statement, FOMC stated that although economic activity “continued to expand at a strong pace”, the uncertainty has increased significantly. Politics makers also indicated that “the risk of high unemployment and high inflation has increased.”
Main meals:
- FOMC voted unanimously to keep the target federal funds 4.25 % -4.5 %
- The Federal Reserve has admitted “increased uncertainty” in its economic outlook
- The statement noted that the risks to both inflation and unemployment have risen
- Powell stressed the approach to “waiting and seeing” in monetary policy during the press conference
- The surface flow of the public budget of the treasury leaves continues to be reduced at the maximum monthly $ 5 billion
More optimistic, the FBI statement also stated that “although fluctuations in net exports have affected data, recent indicators indicate that economic activity continued to expand at a strong pace.”
As for employment and prices, policymakers have provided that “the unemployment rate has settled at a low level in recent months, and the conditions of labor market remains strong. Inflation is still somewhat high.” Without explicitly mentioning the customs tariff, the Federal Reserve Bank statement clearly reflects concerns about the Trump administration’s commercial policies.
During the press conference, President Jerome Powell addressed these concerns directly directly, indicating that the size, scope and continuing of the recently implemented definitions are still unconfirmed. He stressed that there was no “small or non -existence” to wait for more economic clarity before controlling policy prices.
Moreover, Powell suggested that although customs tariffs can cause a single price increase, it may not necessarily lead to persistent inflation pressures.
Market reaction
US dollar against major currencies: 5 minutes
The dollar is overpowered against the main currencies The graph by TradingView
The US dollar, which was trading with caution before the actual federal reserve statement, fell to a decrease against its safe competitors (CHF and JPY) as well as the euro immediately after the announcement.
However, the press conference of Bowel has probably sparked a widespread reaction of the currency because merchants feel comfortable in evaluating the Federal Reserve Speaker that “the economy itself is still in a solid state.” the CME Fedwatch tool Nearly 80 % opportunity is now expected to stay unchanged at the next FOMC meeting compared to 68.8 % a day.
The dollar maintained its climbing in the hours that followed, as it made its strongest gains against the basic commodity currencies while it lags back/Chif (+0.28 %) and USD/JPY (+0.24 %).
