Fed raises but Dollar falls

From The Age:

The Federal Reserve raised its benchmark lending rate a quarter point and continued to project two more rate increases this year, signalling more vigilance as inflation approaches its target.

“In view of realised and expected labour market conditions and inflation, the committee decided to raise the target range for the federal funds rate,” the Federal Open Market Committee said in its statement on Wednesday. “Near-term risks to the economic outlook appear roughly balanced.”

Dollar Index

Surprisingly, the Dollar Index fell sharply on news of the announcement. But selling was mainly traders who had anticipated a more hawkish stance on future rate increases.

Investors had anticipated the tightening. In fact, Treasury yields had climbed with the dollar on speculation the central bank might signal a faster pace of rate rises. But those trades unwound quickly after the announcement.

Source: Fed raises benchmark rate as inflation approaches target

One thought on “Fed raises but Dollar falls

  1. frankaquin0 says:

    Hopefully the start of the return to normality. However I have a question rather than a comment, which I hope you or someone else can answer.
    I often see statements like the one made below, which posit a reason why a movement happened, e.g.: “But selling was mainly traders who had anticipated a more hawkish stance on future rate increases.” Or sometimes we see, “US market falls as Apple disappoints”.
    I realise most statements on the internet are opinions rather than scientifically researched facts, so I’m curious if the reasons given are based on best guess of observers, or do traders give their reasons why they traded in a particular way?

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