- The Federal Reserve kept interest rates unchanged at 0 – 0.25%.
- The AUD/USD initially spiked up to 0.7182, to then retreat towards 0.7140 previous to Fed’s Chair Powell press conference.
The Australian dollar clings to its daily gains after the Federal Reserve signaled that it would raise interest rates “soon” while keeping the Federal Funds Rate (FFR) unchanged at 0 to 0.25%, as widely expected.
The AUD/USD reacted to the upside, reaching a daily high at 0.7182, though as the US central bank Chair Jerome Powell begins his press conference, the pair edges lower some 40 pips, down to 0.7140 at 19:37 GMT.
One of Jerome Powell’s press conference remarks is that the Fed does not have a timing schedule regarding reducing its balance sheet.
Summary of the Federal Reserve monetary policy statement
Federal Reserve policymakers expressed that raising the FFR would be appropriate. In 2021, the US central bank increased the speed of reducing its Quantitative Easing (QE), though it announced another increase in the pace. That said, the Fed will end the QE by early March.
Also, the Fed expressed that it will continue to monitor information for the economic outlook. They noted that “supply and demand imbalances related to the pandemic and its reopening” contributed to elevated inflation levels.
The US central bank expects to begin reducing the balance sheet size once the bank begins the process of hiking rates. Regarding employment, they noted that “job gains have been solid in recent months, and the unemployment rate has declined substantially.”
Update on AUD/USD price action
At press time, at 19:50 GMT, the AUD/USD is plunging to 0.7114, as USD bulls have taken control, pushing the pair down.
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