Strong dovish response to hawkish Fed projections
FOMC left interest rates unchanged at a meeting today, in-line with market expectations, and issued a economic projections that can be described as hawkish. GDP forecasts were boosted and core inflation forecast for 2024 as well. While median dot-plot for 2024 was unchanged at 4.60% compared to December 2023 projections, distribution of votes showed only one FOMC member opting for more than 3 rate cuts this year, while in December 5 members wanted more than 75 basis points of easing. New median for 2024 implies another 3 cuts, compared to 4 in December projections.
In spite of these rather hawkish projections, market reaction was actually dovish. US dollar dropped following the announcement, while indices and gold jumped.
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EURUSD jumped following FOMC decision and climbed to a daily high. However, a big part of the move was already erased. Source: xStation5
GOLD surged above the bearish trendline and tested $2,175 area, the highest level in a week. Source: xStation5
US500 surged after Fed decision and briefly traded at fresh all-time highs above 5,250 pts mark. Source: xStation5
