The Fed Chariman noted there were a number of “cross-currents emerging” which are prompting Fed Officials to modestly lower their growth forecasts for next year.
The Federal Reserve on Wednesday delivered another interest rate hike by a quarter basis point. Despite the overall market slashing odds on a rate hike, the Federal Reserve fulfilled their target of four quarter basis point increases this year.
The hike was widely anticipated and any different approach such as a temporary pause in rate rises would have had a significantly different impact on the markets. In their press conference Fed Chair, Jerome Powell signaled a more patient approach in raising rates next year amid signs that the economy is starting to weaken. A tone we’ve heard extensively throughout the final quarter.
“Despite this robust economic backdrop and our expectation for healthy growth, we have seen developments that may signal some softening,” Powell told reporters.
Jerome Powell added that officials “now think it’s more likely that the economy will grow in a way that calls for two rate hikes next year” which is fewer than initially expected.
The U.S Dollar reacted by regaining strength momentarily, reversing losses against the Euro notably and other currencies too. However, as the market have digested the Fed’s dovish hike and comments, the Dollar is seen to be unfavored and significantly weaker today. The Euro is currently attempting to break the 1.1450 level which has been a significant barrier for the pair. Should we see price sustain above we could see prices rise up to the 1.1550 regions as further dollar depreciation continues.