- USD/JPY took a quick plunge into 151.25 after Fed held rates.
- FOMC sees slightly higher rates in the future than previously expected.
- Markets shrug off higher growth forecast, price in additional easing.
USD/JPY took a quick dive into 151.00 after the Federal Reserve (Fed) held its main reference rate at 5.5% as markets had broadly predicted. Risk-hungry investors are shrugging off higher-than-previous growth expectations and interest rate forecasts from the Federal Open Market Committee (FOMC). According to the FOMC, US Gross Domestic Product (GDP) growth through 2024 is going to be slightly higher than forecast, and year-end interest rates are likely to be higher than previously expected.
Despite upside shifts to the Dot Plot, the Fed still expects three rate cuts through 2024 for around 75 basis points, and markets are keeping hopes of near-term rate trimming to begin closer to the middle of the year. Fed Chairman Jerome Powell is due at the bottom of the hour at 18:30 GMT.
Read more: Fed leaves interest rate unchanged at 5.25%-5.5% as forecast
Fed Chair Powell noted that while inflation continues to ease down towards 2.0%, victory ultimately hasn't been achieved and uncertainty remains a key sticking point for the FOMC. Chairman Powell went on to specifically highlight that the Fed won't be putting too much emphasis on one or two months' worth of data. Chair Powell also flagged a slackening in the US labor market as a specific trigger necessary to kick off rate cuts.
Read more: Inflation eased substantially but ongoing progress is not assured
USD/JPY 5-minute chart
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