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Investing.com – The Federal Reserve left its key rate unchanged at 5.5%, in line with market expectations, and may keep its monetary policy unchanged for some time to ensure lower inflation. However, markets already expected a rate cut in the second quarter of next year before this meeting.
The American central bank also published its economic projections. The dot chart showed Fed members’ forecasts that interest rates had reached their upper bound. Most Fed members believe that rates should fall starting next year and continue to fall until 2026.
Markets reacted with high volatility after the Fed’s decision and especially after reading the central bank’s projections, which suggest a more flexible monetary policy than the institution has advocated so far. The exchange rate therefore fell sharply against the euro, while government bond yields fell by more than 10 basis points after the decision.
The Americans took off within minutes and could see their gains extended. This allowed traders to maintain an optimistic outlook and push the market higher. Similarly, they also posted gains, but to a lesser extent compared to stocks.
All eyes now turn to the Federal Reserve press conference in a few minutes. Watch Jerome Powell’s press conference: