US Fed Forces Dollar Volatility on Rate Decision

The Federal Open Market Committee forced considerable US Dollar as they predictably left interest rates unchanged, committing to “Exceptionally low” rates for an “Extended period”. Yet the Fed likewise recognized that “economic activity has continued to pick up and that the deterioration in the labor market is abating.” Yesterday’s surprisingly high Producer Price Index inflation numbers seemingly had little effect on long-term inflation forecasts and monetary policy, and officials stated “substantial resource slack [is] likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for quite some time."

The net result of the Fed’s actions was not immediately clear, as the US Dollar initially fell sharply but subsequently rallied against the Euro and other key counterparts.