Dollar Rebounds From Lows as Fed Ups Growth Outlook, Signals Low Rates to Continue

Dollar Rebounds From Lows as Fed Ups Growth Outlook, Signals Low Rates to Continue  | Sep 16, 2020 21:00

Dollar Rebounds From Lows as Fed Ups Growth Outlook, Signals Low Rates to Continue

By Yasin Ebrahim – The dollar rebounded from lows Wednesday, as the Federal Reserve forecast rates to remain on hold until at least 2023, but also upgraded its economic outlook, citing a faster recovery.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.17% to 93.24.

The Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25% and tied its policy guidance to inflation rising above 2% for some time.

"(I)t will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time," the Fed said.

Policymakers backed rates to remain unchanged through 2023, according to the Fed’s summary of economic projections.

"The dot plot shows only 3 of the 17 policymakers with a dot above the 0-25 bps target range by the end of 2023, and taking their guidance and inflation forecasts together, it suggests that the more likely time for liftoff is at least 2024," Jefferies (NYSE:JEF) said in a note.

The move to keep interest rates near zero comes as the central bank's latest outlook on growth acknowledged the faster than expected pace of the recovery.

The central bank expects the economy to contract by 3.7% in 2020, compared with an estimate for a 6.5% decline previously. But growth in 2021 and 2022 was revised lower to 4% and 3% from 5% and 3.5%, respectively.

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Deval Shah
Deval Shah

Fed should not give interest rate projections till 2023.In today's environment things can change overnight.Prudence should prevail before projecting a policy stance.  ... (Read More)

Sep 17, 2020 00:33 GMT· Reply
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