US Federal Reserve hikes as expected

Source: Dukascopy Bank SA
On September 21, the United States Federal Reserve hiked the Federal Funds Rate by 0.75%. The market consensus was that the US Federal Reserve would hike its base interest rate from 2.50% up to 3.25%. At exactly 18:00 GMT the rate was hiked as expected by 0.75%.

By inspecting the statement and comparing it to the previous one, it was discovered that the FOMC literally changed half a sentence, the date and rate numbers.

Namely, the central bank deleted the words "indicators of spending and production have softened" in the July statement to "indicators point to modest growth in spending and production." This line indicates that the central bank now sees more room for larger rate hikes. Due to that reason, the US Dollar surged.

Previous July Document

Federal Reserve Press Release July 27, 2022

Released Statement

Federal Reserve Press Release September 21, 2022

Meanwhile, note that the Fed released its short term economic projections in a document. For more in-depth analysis go through the document to see how currently the policymakers see the near term future. 

Economic Projections

Summary of Economic Projections

At 18:30 GMT, the Chairman of the Federal Reserve Jerome Powell hosted a press conference. Views and plans expressed in the conference have quite often reversed the market momentum and the direction of the US Dollar's value in the aftermath of the initial hike. This event was no exception.

As the head of the central bank started to speak, the US Dollar declined in value, as the markets saw his statements as dovish. Afterwards, during the question phase of the press conference, the US Dollar reached below pre-hike levels. However, by the end of the conference, as the harsher questions were answered, the USD once again strengthened, because it was clear that future rate hikes are incoming. 

Recording of the Press Conference

FOMC Press Conference September 21, 2022

In regards to the main USD pair, the EUR/USD. During the event the pair booked a new low level, passing the previous September low levels. Meanwhile, note the high volatility on the five minute chart.

Initial Reaction

Larger scale situation

Actual Topics

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