Sign up to create alerts for Instruments,
Economic Events and content by followed authors
Free Sign Up Already have an account? Sign In
Quotes
All Instrument Types
- All Instrument Types
- Indices
- Equities
- ETFs
- Funds
- Commodities
- Currencies
- Crypto
- Bonds
- Certificates
Please try another search
🙌 It's Here: the Only Stock Screener You'll Ever Need Get Started
Dollar hits near 7-week low as Fed’s terminal rate approaches
Published Mar 22, 2023 08:18PM ET
Updated Mar 22, 2023 08:25PM ET
© Reuters.
By Ambar Warrick
Investing.com -- The dollar tumbled to a near seven-week low on Wednesday after the Federal Reserve hiked interest rates as expected, although some language in the central bank’s announcement suggested that interest rates may be close to reaching their peak.
The dollar index fell about 0.7% against a basket of currencies to 102.185 points - its weakest level since early-February.
The Fed hiked rates by 25 basis points to 4.75%-5%, within market expectations. But a change in the bank’s language signaled a potential policy shift, which could see the bank hit its terminal rate sooner than expected.
The central bank said that it will raise rates by at least 25 bps more this year. But it also said that “some additional policy firming may be appropriate,” a shift from its previous language of “ongoing increases in the target range will be appropriate” - a statement it has mentioned in every policy meeting since March 2022, when it had embarked on its latest hiking spree.
The central bank kept its benchmark rate forecast unchanged from December and forecast a peak rate of 5.1% in 2023, and said it was not considering any rate cuts this year.
The Fed hiked rates by a cumulative 500 bps over the past year - its most aggressive tightening spree in 40 years, as it moved to curb rising inflation.
But the recent collapse of several regional U.S. banks raised concerns over damage to the economy from rising interest rates. While the bank had swiftly intervened to prevent a larger crisis and restore faith in the banking system, the event spurred increased bets that the Fed had limited economic headroom to stay hawkish this year.
“This has been the most aggressive monetary policy tightening cycle for 40 years and by going harder and faster into restrictive territory you naturally have less control over the outcome,” analysts at ING wrote in a note.
Still, Chairman Jerome Powell said on Wednesday that the banking system is “sound and resilient,” and downplayed fears of a bigger crisis. He also reiterated that the fight against inflation was set to continue, given that price pressures remained stubborn in recent months.
But markets are still pricing in an at least 25 bps to 50 bps rate cut this year, while ING forecast increased headwinds for the economy from a more restrictive stance.
Related Articles
Add Chart to Comment
Confirm Block
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
Report this comment
I feel that this comment is:
Comment flagged
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.