EUR/USD Tumbles as Fed's Hawkish Stance Crushes Eurozone Inflation Hopes

The EUR/USD exchange rate dropped to around $1.1480 on September 17 after a significant decline from the 1.1550-1.1530 area, driven by the Federal Reserve's decision to raise interest rates by 25 basis points to 3.75-4.00%.

The Fed emphasized that the US economy continues to grow at a solid pace, with a stable labor market and inflation still too high. The updated dot plot suggests one more rate hike by the end of 2026, while the median rate forecast for the end of the year was raised to 4.1%.

Fed Chair Kevin Warsh reinforced this signal, stating that inflation remains the main concern and that the summer data do not show a significant improvement in the underlying price trend, while the economy itself has rather strengthened in recent weeks.