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- The Fed is fundamentally committed to price stability, a USD positive signal – Commerzbank
The Fed is fundamentally committed to price stability, a USD positive signal – Commerzbank
Economists at Commerzbank analyze Dollar’s outlook following the FOMC’s first policy decision for 2024.
How should we interpret FOMC’s decision?
The fact that the FOMC still wants to wait and see is a signal that it has a very, very strong hawkish bias. ‘When in doubt, wait rather than cut’ seems to be the FOMC's thinking. Is the Fed excessively hawkish? After all, high interest rates also have negative side effects.
Ultimately, however, the image of a rather hawkish Fed could be worth a lot in the future. If everyone is convinced that the Fed is fundamentally committed to price stability, there will be no need for excessive interest rate movements in the future. In other words, those who feared that the recent period of high inflation had led to a permanent loss of confidence in the Fed can be reassured. The Fed is currently fighting to regain that confidence.
This (and not ¼ percentage point more or less USD carry) is the USD positive signal from Wednesday's Fed decision and communication!
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