EUR/USD Impact – Fed Scales Back Rate-Rise Forecasts as Global Risks Remain


Good day forex traders.

This is an important development. A dovish stance by the US Federal Reserve on interest rates hike is likely to dampen demands for the US dollar. This may indicate that the global economic situation is far reaching in its effect. Bloomberg provides a good report.

The Federal Open Market Committee kept the target range for the benchmark federal funds rate at 0.25 percent to 0.5 percent, the central bank said in a statement Wednesday following a two-day meeting in Washington. The median of policy makers’ updated quarterly projections saw the rate at 0.875 percent at the end of 2016, implying two quarter-point increases this year, down from four forecast in December.

“The committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen,” the FOMC said . “However, global economic and financial developments continue to pose risks.”

Kansas City Fed President Esther George dissented from the decision, preferring a quarter-point rate increase.Yields on Treasury securities fell following the Fed’s actions, with the rate on the 10-year note dropping to 1.92 percent at 2:10 p.m. in New York from 1.99 percent just before the announcement. ‘Dovish’ Hold “The tone of the FOMC statement and accompanying economic projections was dovish,” Neil Dutta, head of U.S. economist at Renaissance Macro Research LLC in New York, said in a research note. The reference to global risks “pushes the Fed in the role of the world’s central bank. […]

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