FOMC Recap: Less Dovish Powell Pushes Dollar Back Toward 10-Month Highs

Key Points

• The Federal Reserve’s FOMC kept interest rates unchanged in the 3.50-3.75% range, as expected, in an 11-1 vote.
• The dot plot indicates a more gradual, shallower rate cut path, reflecting a convergence among committee members.
• The US Dollar Index (DXY) is trading near the 100.00 level as traders adjust their expectations for interest rate cuts.

FOMC Interest Rate Decision

The Federal Reserve’s FOMC decided to maintain interest rates in the 3.50-3.75% range, with Stephen Miran being the only dissenting vote. No other changes to monetary policy were made during this meeting.

FOMC Monetary Policy Statement

The accompanying monetary policy statement saw no significant changes. It noted that the unemployment rate has “been little changed in recent months” and acknowledged “uncertain” economic implications from developments in the Middle East.

Summary of Economic Projections and Dot Plot

The FOMC released updated quarterly economic forecasts, with the most notable change being the inflation projection, now at 2.7% for this year, with a slight decrease to 2.2% in 2027. The GDP growth forecast was adjusted to 2.4%, while the unemployment rate remains at 4.4% for this year and slightly increases to 4.3% next year.

The dot plot showed no changes in the median expectation of one interest rate cut in 2026 and one in 2027, but a shift towards fewer cuts among the more dovish members was noted.

FOMC Chairman Jerome Powell’s Press Conference

Jerome Powell's press conference revealed a moderately less dovish stance. Key highlights include:

• Attention to risks on both sides of the mandate.
• Near-term inflation expectations have risen due to Middle Eastern developments.
• Past rate cuts are expected to stabilize the labor market.
• Inflation progress is anticipated, but not as much as hoped.
• Concerns about the balance between employment and inflation risks.

Powell emphasized uncertainty in economic forecasts and the timing of future interest rate changes, indicating that if inflation does not progress, rate cuts will not occur.

US Dollar Technical Analysis

Following the FOMC meeting, traders have pushed back expectations for immediate interest rate cuts, leading to an increase in the 2-year Treasury yield. The US Dollar Index (DXY) has risen, trading near the 100.00 level, with a key resistance level at 100.50. A break above this level could lead to further gains above 101.00.