Federal Reserve interest rate decision: Rates left unchanged

• Fed funds target range remains 5.25-5.50%, as widely expected
• Previously, the key line was “The Committee does not expect it will
  be appropriate to reduce the target range until it has gained greater
  confidence that inflation is moving sustainably toward 2 percent” — this was unchanged
• Statement says job gains have remained strong, rather than “job gains have moderated since early last year but remain strong”
• Repeats: Inflation has eased over the past year but remains elevated
• Dots continue to show 75 bps in cuts this year but show fewer in 2025 and 2026
• 2024 core PCE median seen at 2.6% vs 2.4% prior
• Central tendency on PCE inflation edges up
• No mention in the statement of the balance sheet or tapering

The Fed funds futures market was pricing in 74.8 bps in easing this year ahead of the decision and US 2-year yields were trading at 4.67%. USD/JPY was trading at 151.59 and EUR/USD at 1.0863.

The market is focused on the 2024 dot plot continuing to show three cuts, which is a strong hint at a June cut. The US dollar has sold off with USD/JPY down to 151.35 and EUR/USD up to 1.0891.

This article was written by Adam Button at www.forexlive.com.