The Fed Hikes Rates As Expected, while the USD Holds Onto Today’s Gains

Sept. 26, 2018 (Western Union Business Solutions) – The U.S. dollar initially weakened after a somewhat dovish rate hike by the Federal Reserve.

As expected, America’s central bank raised its base rate to 2.25% from 2%. The Fed’s statement noted a strong U.S. economy with upgrades to its growth forecasts for this year and next year. However, the Fed’s policy stance is no longer ‘accommodative,’ which sent a signal to markets that it could be closer to ending its rate hiking cycle that started in late 2015.

 

While the Fed removed the “accommodative” language from its statement, the rest of it largely maintained the status quo, resulting in the limited impact, so far, on the U.S. currency. However, the notion that the Fed may be closer to the end its policy tightening cycle could leave the dollar vulnerable to further downside risk over the coming days and weeks.

 

Strong growth led the Fed to reaffirm plans to raise rates one more time this year and do so three times in 2019. The Fed’s final two announcements of the year are on Nov. 8 and Dec. 19.


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