Today's Fed decision was rather uneventful, even despite two votes for a cut, which was the first such situation since 1993. What is more, the statement itself, pointing to a slightly worse economic situation, suggested opening the door to a September cut. However, Powell's words during the conference can be considered quite hawkish.
Powell himself pointed out that the Fed is currently turning a blind eye to elevated inflation by not raising interest rates. This means that the Fed still sees considerable risk in elevated inflation. Although the Fed does not believe that tariffs will have a lasting impact on elevated inflation, it does not rule out such a scenario. Powell is not communicating that there will be a cut in September. The Fed's current stance shows some resistance to pressure for cuts. The dollar continues to strengthen after Powell's comments, and yields are also rising as the chances of rate cuts this year diminish. The market no longer prices in a high probability of two cuts this year.
Powell noted that a clearly negative signal from the labor market or a noticeable decline in inflationary pressure would be an argument for a cut. The Fed chief emphasized that the bank is closely monitoring unemployment data.
EURUSD pair drops to 100-day EMA for the first time since March 2025.

Source: xStation
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