JABAR EKSPRES – The U.S. dollar weakened against its major peers in late trading Thursday morning (GMT), as the Federal Reserve kept its benchmark interest rate unchanged at 5.00-5.25 percent at the end of its June meeting, in line with expectations.
The dollar index, which measures the greenback against six major rivals, fell 0.07 percent to 103.2667 in late trade, after hitting four-week lows earlier in the session.
“Holding the target range steady at this meeting allowed the committee to assess additional information and its implications for monetary policy,” the Federal Open Market Committee (FOMC) said in a statement.
The Fed also projected the economy to grow 1.0 percent this year, higher than the 0.4 percent forecast in March. The GDP growth forecast for 2024 was lowered by 0.1 percentage point to 1.1 percent.
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In opening comments at his press conference, Fed Chair Powell said that “virtually all” policymakers “expect it will be appropriate to raise rates further through the end of the year.”
New forecasts released alongside the decision show that most Fed officials expect the federal funds rate to rise to 5.6 percent, suggesting two more further hikes through December.
Fed officials now expect the fed funds rate to reach 5.6 percent this year, implying two more 25 basis point hikes by 2023, an increase from the 5.1 percent forecast in the last set of forecasts released in March.
After the announcement of the decision, the US dollar suddenly surged, recovering most of the losses it experienced before the decision was released.
“The slowdown in US inflation in May to 4.0 percent has given the Federal Reserve the confidence to stop raising interest rates in the 5.0-5.25 percent range after ten consecutive rate hikes since March last year,” said Srijan Katyal, head of global strategy and trading services at international brokerage firm ADSS.
