Dollar Rallies Amid Hawkish FOMC Decision, UN Meeting Looms
The US dollar rallied across the board on Wednesday following the FOMC decision as investors initially viewed it as more hawkish than expected.
The Fed hiked interest rates by 25 bps, as widely expected in an unanimous decision. The part saying that inflation remained elevated in part reflecting supply shocks was removed from the statement.
The SEP showed an upward revision for growth and inflation, and a downward revision for unemployment. The dot plot projected just one more rate hike in 2026, with rates staying higher throughout 2027 before rate cuts coming in 2028, which is considered more dovish compared to market's pricing.
The market brought forward rate hike expectations for October, with the probability now standing around 50%. This is because Fed Chair Warsh mentioned that they want to see a timelier return to the 2% target.