In line with expectations. We can sum up the Fed’s monetary statement and rate decision in four words, although the initial reaction of the markets points to a dovish interpretation by the “algos” and traders alike. The target benchmark interest rate of the Fed remained between 1% and 1.25%, while the Fed didn’t announce an exact date for the planned reduction of its balance sheets, as some analysts expected. The FOMC also changed the language concerning inflation in a dovish fashion following several months of misses in the most watched measure the CPI index.
The Dollar trades lower following the announcement, testing the recent lows against the Euro near 1.17, while US stocks are moderately higher, still trading near their all-time highs. Gold is also at its daily highs, but overall, the market’s reaction is muted, and Treasuries are little changed, as the Fed met the bond market’s expectations.
EUR/USD 5-Min Chart
The Fed might have missed one of the last opportunities to move to a more hawkish stance, as if the weakness in “hard” economic numbers persists, the central bank will have no firepower to prop up the economy, making a possible downturn that much more risky for bulls. Gold, cryptocurrencies, and the Yen might sustainably benefit from the decision, while the Euro, stocks, and industrial commodities will also likely get boosted by it short to mid-term.