Following its 2-day meeting, the Federal Open Market Committee announced that it left the benchmark interest rate unchanged at the target range of 2% – 2.25% in a widely expected decision. Jerome Powell, Chair of the Board of Governors of the Federal Reserve System, won’t be appearing at a news conference today.
Key highlights from the official statement (via Reuters)
- The labor market has continued to strengthen and that economic activity has been rising at a strong rate.
- Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year.
- In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 2 to 2-1/4 percent.
About the interest rate decision
With a pre-set regularity, a nation’s Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks. In the US, the Board of Governors of the Federal Reserve meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency. A rate cut tends to weaken the local currency. If rates remain unchanged (or the decision is largely discounted), attention turns to the tone of the FOMC statement, and whether the tone is hawkish, or dovish over future developments of inflation.
About the FOMC statement
Following the Fed’s rate decision, the FOMC releases its statement regarding monetary policy. The statement may influence the volatility of USD and determine a short-term positive or negative trend. A hawkish view is considered as positive, or bullish for the USD, whereas a dovish view is considered as negative, or bearish.
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