Dollar Pares Its Advance as Fed Signals Stagflation
The dollar pared gains after the Federal Reserve kept interest rates unchanged, as expected, but said it sees slower economic growth and higher inflation. The yen was the best performer in the Group of 10 with euro lagging behind majority of peers.
The Bloomberg Dollar Spot Index traded up 0.2% post-Fed decision after being up as much as 0.5% earlier
Fed Chair Jerome Powell said “uncertainty today is unusually elevated,” but the central bank remained in no hurry to change policy
“The updated Fed statement giving off stagflation vibes with growth projections revised lower while inflation forecasts bumped up somewhat,” said Valentin Marinov, head of G-10 FX research and strategy at Credit Agricole. “The USD is off a tad mainly because the statement and Summary of Economic Projections come across as gloomier than the Fed’s recent rhetoric”.
EUR/USD fell 0.5% to 1.0896.
USD/JPY fell 0.3% to 148.81.
The Bank of Japan earlier held rates as expected by all economists surveyed by Bloomberg; Governor Kazuo Ueda said US tariffs may affect Japanese household and business sentiment, while their impact on prices and the economy won’t be clear for a long time. He pledged to act without falling behind in response to the impact of tariffs.
Source: Bloomberg
