The dollar fell after the fed’s decision on rate
Expected the fed raised the rate by 0.25% points, while maintaining the average forecast for a further 2 increase for 2018. However, the FOMC expressed confidence in the economic prospects. Estimates of economic growth for the current and following year were increased, and unemployment reduced. This resulted in the revision of expectations at the rate for 2019 with two to three times. However, although the average rate forecast for this year has not changed, still the number of supporters of a more active increase increased.
In the subsequent press conference, Powell preserved the basic line of Yellen about the “gradual increase in rates.” This is an important signal for the markets, and it was manifested in the continuity of care policy.
You should pay attention to two points:
First, the growth of the economy increased this year by 0.2 percentage points to 2.7% and next year by 0.3 percentage points to 2.4%, which is significantly higher trend of 1.8%. However, this increased rate of growth of the economy, the fed does not expect inflation to rise. The Committee was limited to the minimum (0.1 PP) increase in core inflation forecast to 2019 year to 2.1%. This caused concern, as previously, the fed repeatedly said that the low unemployment rate (now it is near the lows for half a century) and the strong growth will spur inflation.
The second thing that wariness of the markets is confidence in the strength of the economy, despite recent signs of momentum loss. The February employment report was strong, however, the housing market, consumer spending, and some indicators of business activity point to a slowdown in the beginning of the year.
The net result can be considered a weakening dollar. The risk around too fast a rate increase is not yet implemented, taking power from the main driver of the growth of the American currency in recent days.
The EURUSD rose as a result from 1.2350 to 1.2250. In General, Forex dollar index fell by 0.8% at the end of trading Wednesday, dropping to levels a week ago. This movement considerably, but it is not catastrophic for the markets.
In General, the ability of Powell to demonstrate the continuity of fed policy, it is possible to estimate highly: rhetoric was optimistic, but quite sustained, and the volatility of the dollar were within the normal beginning of the month.
The stock markets are losing ground, however this is more the fault of fears around trade policy trump. Powell in the answers to the questions of the journalists pointed out that the business is wary of looking at this process for fear of worsening conditions.
The forecasts of the fed and the accompanying comments relatively favorable for emerging markets and commodities.