Fed Hike Crushes Euro as Hawkish Shift Takes Hold
The Federal Reserve's decision to raise interest rates for the first time in over three years sent shockwaves through the financial markets, with the euro plummeting to multi-month lows against the US dollar.
The unanimous vote by the FOMC was seen as a hawkish shift in monetary policy, with 12 of the 18 participants expecting at least one more 25bp hike and four anticipating another 50bp of tightening.
The updated economic projections also pointed to stronger growth, lower unemployment, and firmer inflation, validating the hawkish pricing across the curve.
Kevin Warsh, a key FOMC member, emphasized that he would be 'hard pressed to describe broad financial conditions as restrictive', suggesting that current policy is not particularly restrictive even after the hike.