Fed: Hawkish hold provided momentary anchor for USD – DBS

DBS Group Research economist Philip Wee notes that the Federal Reserve (Fed) kept the Fed Funds Rate at 3.50-3.75%, delivering what he characterizes as a hawkish hold. He highlights that this stance has given the Dollar only a temporary anchor, as markets remain volatile.

Fed stance and Dollar reaction assessed

"The FOMC’s decision to maintain the Fed Funds Rate at 3.50-3.75% met broad market expectations."

"However, the decision also came across as a hawkish hold from the near-unanimous 11-1 vote to keep the current restrictive stance, the updated Summary of Economic Projections (SEP), which raised the GDP growth and PCE inflation forecasts, and the higher-than-expected PPI readings before the meeting. "

"Fed Chair Powell emphasized the Fed’s priority of ensuring no repeat of a de-anchoring of inflation expectations."

"While the FOMC’s hawkish stance has provided a momentary anchor for the USD, we remain wary of assuming this marks a definitive trend, given the market’s persistent tendency to oscillate from event to event amid heightened geopolitical uncertainty."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)