Fed hikes rates – not so dovish


The Fed made the historic decision and raised rates. The dot plot has hardly changed for the interest rate and this is hawkish. For 2016, we have 1.4% unchanged, for 2017 2.4% from 2.6% and for the longer run it is unchanged at 3.5%.

The statement puts an emphasis on inflation, and the need to watch it closely, but there were no dissenters.

More: Yellen explains the liftoff – live blog

USD is stronger. Update: The greenback is sliding back down after the initial move, and we are all waiting to hear from Yellen.

This is the key passage from the statement regarding the future:

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Federal Reserve was expected to raise interest rates for the first time since 2006. This was well telegraphed and markets were also looking beyond this: to the path of hikes in 2016 as pictured in the dot plot, the text of the statement, the forecasts and the press conference.


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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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