USD Slump Continues as the Federal Reserve Prefer Rates to Remain Low: FOMC Meeting Minutes
Minutes from the last FOMC meeting released on Jan 6 revealed that committee members prefer interest rates to remain at near zero, a revelation that saw the USD slump in the European and NY sessions. Although the greenback is firmer in the Asian session, the backing of the status quo and aggressive bond purchases bode negatively for the USD, providing tailwinds for other majors to extend gains.
Before yesterday's minutes, there had been signals that the central bank was planning to tone down and recalibrate bond purchasing at some point in 2021. Presently, the Federal Reserve prefers keeping interest rates between 0 and 0.25 percent, and bond purchases at $120 billion every month. However, with yesterday's news, it appears that the FED is adamant with their narrative of offering support to the economy, coming at a time when the economy is taking a turn for the worst with coronavirus spreading. All this is at the expense of the USD.
Impact on the USD:
Neutral. Even though the US monetary policy is loose, the injection of the $900 billion stimulus deal that was agreed on in December has been shot in the arm for the economy. Combined with rosy projections from the IMF and a drive to vaccinate against the pathogen, the economy could snap back, boosting the USD as a result.
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