Dollar tumbles broadly as FOMC decides to keep the target range for the federal funds rate between 0-0.25% and refrained from a rate hike. The decision was made with 9-1 vote, with Richmond Fed President Jeffrey Lacker dissented and called for a 0.25% hike. In the accompanying statement, it was noted that "recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term." FOMC will take into account a wide range of information, including "readings on financial and international developments" before deciding on a rate hike.
Meanwhile, in the updated projection, Fed is forecasting federal funds rate to be at 0.4% by the end of 2015. That is, there would still be one rate hike between October and December. Fed funds rate is projected to be at 1.4% in 2016, 2.6% in 2017 and 3.4% in 2018. That was downward revision from June's projection of 0.6% in 2015, 1.6% in 2016 and 2.9% in 2017 respectively.
Unemployment rate projections were generally revised lower, showing Fed's confidence in improvements in the labor markets. Unemployment rate is forecast to be 5.0% in 2015, 4.8% in 2016, 2017 and 2018. That's lower then June's forecast of 5.3% in 2015, 5.1% in 2016 and 5.0% in 2017 respectively. GDP projections were mixed. GDP was projected to grow 2.1% in 2015, 2.3% in 2016, 2.2% in 2017 and 2.0% in 2018, comparing to June's projection of 1.9% in 2015, 2.5% in 2016 and 2.3% in 2017.
Headline inflation projections were generally revised lower. PCE is forecast to be 0.4% in 2015, 1.7% in 2016, 1.9% in 2017 and 2.0% in 2018, comparing to June's projection of 0.7% in 2015, 1.8% in 2016, 2.0% in 2017. Core PCE was forecast to be 1.4% in 2015, 1.7% in 2016, 1.9% in 2017 and 2.0% in 2018, comparing to June's projection of 1.3% in 2015, 1.8% in 2016 and 2.0% in 2017.
There is generally no change in dollar index's outlook. Rebound form 92.61 should have completed at 96.61 after hitting resistance form 55 days EMA. Fall from there is viewed as part of the consolidation pattern from 100.39. Deeper fall could be seen back to 92.62 support in near term. At this point, we'd expect strong support from 38.2% retracement of 78.90 to 100.39 at 92.18 to contain downside and bring rebound. Overall, the consolidation from 100.39 is set to extend further sideway and there is not sign of range breakout.
