Breaking: Fed leaves policy rate unchanged, says will soon be appropriate to raise rates

The US Federal Reserve announced on Wednesday that the FOMC had agreed to leave the Federal Funds target range unchanged at 0.0-0.25%, in line with expectations. The central bank said that it would soon be appropriate to raise the Federal Funds rate, the strong hint that many market participants would have been looking for that a first post-pandemic rate hike in March is likely.

Additional Takeaways as summarised by Reuters:

"The Fed will bring bond-buying to an end in early March."

"The Fed is prepared to adjust the stance of monetary policy as appropriate if risks emerge that impede its goals."

"In assessing monetary policy, the Fed will continue to monitor incoming information for the economic outlook."

"Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation."

"The sectors most adversely affected by the pandemic have improved in recent months but are being affected by the recent sharp rise in Covid-19 cases."

"To increase treasuries by $20B, MBS by $10B starting in February."

"The Fed expects that reducing balance sheet size will commence after the process of increasing the target range for the federal funds rate has begun."

The Fed reaffirms in an identical statement the longer-run goals and monetary policy strategy adopted in August 2020.

"Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation."

"The policy vote was unanimous."

"Indicators of economic activity and employment have continued to strengthen."

"The Fed agreed principles for reducing the balance sheet."

"Job gains have been solid in recent months, and the unemployment rate has declined substantially."

"In the longer run, the Fed intends to hold primarily Treasury securities."

"The Fed is prepared to adjust any details on reducing balance sheet in light of economic and financial developments."

Market Reaction

The Dollar Index saw a mixed, two-way initial reaction as traders digest what appears to have been a very much in line with expectations Fed monetary policy statement and decision. Attention now turns to Fed Chair Jerome Powell's appearance at the press conference from 1930GMT.  

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content

Recommended content

Editors’ Picks

EUR/USD stays below 1.0700 after upbeat US PMI data

EUR/USD stays below 1.0700 after upbeat US PMI data

EUR/USD stays on the back foot and trades in negative territory below 1.0700 as the US Dollar benefits from upbeat data in the American session. S&P Global reported that the economic activity in the US private sector continued to expand at a robust pace in June.


GBP/USD drops to fresh multi-week low below 1.2650

GBP/USD drops to fresh multi-week low below 1.2650

GBP/USD remains under bearish pressure and trades at its lowest level since mid-May below 1.2650. The stronger-than-forecast Manufacturing and Services PMI data from the US helps the USD hold its ground and causes the pair to stretch lower.


Gold drops below $2,340 as US yields rebound

Gold drops below $2,340 as US yields rebound

Gold loses its traction and trades deep in the red below $2,340 in the second half of the day on Friday. The benchmark 10-year US Treasury bond yield pushes higher following the upbeat PMI data from the US, weighing on XAU/USD.

Gold News

Bitcoin retraces to crucial support

Bitcoin retraces to crucial support

Bitcoin price encounters resistance at weekly highs before retracing to seek support at a crucial level, while Ethereum and Ripple align closely with Bitcoin's movements, gearing up to surpass resistance barriers and embark on upward rallies.

Read more

Week ahead – US PCE inflation the highlight of a relatively light agenda

Week ahead – US PCE inflation the highlight of a relatively light agenda

Core PCE inflation to test bets of two Fed rate cuts in 2024. Yen awaits BoJ Summary of Opinions, Tokyo CPI. Canadian CPI data also enters the spotlight.

Read more