Dollar Modestly Lower After Fed Hike, Mixed Statement

At the conclusion of its two-day FOMC monetary policy meeting, the Federal Reserve expectedly raised its key lending rate target range by 25 basis points to 1.50-1.75%, its first such move for 2018.

In its accompanying statement, the Federal Reserve sounded a generally more confident tone on the economy by saying that the growth outlook had strengthened in recent months and that inflation is expected to move up in the coming months. There were some very modest points of cautious in the statement with officials saying household spending had moderated.

The closely watched DOTs, or the median projection of policymakers’ forecasts for interest rates remained unchanged at a total of three hikes for 2018- a slightly disappointing development for dollar bulls that were looking for the Fed to raise expectations for 2018 hikes to a total of four.

For 2019 and 2020, the Fed significantly raised its outlook for lending rate increases.

So, the overall tone of the statement was slightly more confident without being significantly more hawkish- a delicate balance that the Fed managed to strike.

And while the 2018’s rate outlook has not changed much, 2019 and 2020 looks significantly more hawkish. As a result, the dollar slightly lower following the Fed statement in very choppy trade.

Investors await further clues from the post-meeting press conference by Fed Chair Powell.