Dollar Higher as Fed Hinted as Steeper Rate Hike

Dollar rises against other major currencies after Fed left rates unchanged near zero and continued tapering by another $10 b as widely expected. While Fed kept the language of keeping rates low for “considerable time” after asset buying ends, the overall statement, as well as the latest economic projections were slightly more hawkish. In particular, Fed noted that the “likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year.” Fed also published new guidelines for its exit strategy and noted that it will “depend on how economic and financial conditions and the economic outlook evolve” in phasing out the reinvestments. Overall, dollar’s strength post FOMC is relatively limited, except versus the broadly weak Japanese yen.

An important point to note is that Fed officials now projected the federal fund rate at 1.375% by that end of 2015. That’s quite an upgrade from June’s projection of 1.125%. Markets perceived that as a signal of steeper path of policy normalization 14 of 17 officials expected first hike in 2015, one thought Fed should hike this year and two thought Fed could wait until 2016. Meanwhile, they also projected the federal fund rates to be at 3.75% by the end of 2017.

Regarding the economy, Fed projected GDP to rise 2.6-3.0% in 2015, 2.5-2.9% in 2016 and 2.3-2.5% in 2017. That compared to June’s projection of 3.0-3.2% in 2015, and 2.5-3.0% in 2016. Fed perceived some downside risk in the economy for 2015 and the officials could be remain a bit cautious head. Unemployment rate is estimated to be at 5.4-5.6% in 2015 and 5.1-5.4% in 2016 and 4.9-5.4% in 2017. There’s slightly downside revision comparing to June’s projections of 5.4-5.7% in 2015 and 5.1-5.5% in 2016. Core CPI is projections to be at 1.6-1.9% in 2015, 1.8-2.0% in 2016 and 1.9-2.0% in 2017, comparing to June’s projection of 1.6-2.0% in 2015 and 1.7-2.0% in 2016.

This entry was posted in Binary Options Daily Related News and tagged , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *