Fed Rate Cuts are Coming, So Why Didn't the Dollar Crash?

Jerome Powell speaks at a conference involving its review of its interest-rate policy strategy and communications in Chicago. On Wednesday June 19 the Federal Reserve releases its latest

Jerome Powell speaks at a conference involving its review of its interest-rate policy strategy and communications in Chicago. On Wednesday June 19 the Federal Reserve releases its latest

US interest rates futures prices jumped on Wednesday as traders now fully expect a rate cut from the Federal Reserve in July after policy-makers signaled they are prepared to ease policy due to greater uncertainty on the economic outlook.

Even as the USA central bank left its benchmark interest rate unchanged for now, the shift in sentiment since its last policy meeting was marked.

These two lines in the Fed's statement help to narrow the reasons behind a future rate cut. Eastern time. Earlier this month, Powell said the Fed is open to lowering interest rates to counter any damage from the U.S.' trade war with China.

Trump slapped new tariffs on China on May 5, took other steps that upended markets, and yet of late has sent hopeful signals of progress in the dispute when he meets Chinese officials next week - hard terrain for the Fed to navigate.

President Donald Trump has been clamoring for the Fed to lower interest rates, and has reportedly considered firing or demoting Powell.

The Fed didn't specify when it would decrease rates, but almost half of Fed leaders now predict rates will fall by the end of the year, a significant change from March when none of the 17 Fed policymakers anticipated a cut this year.

As for potential effects on monetary policymaking, Powell said that "we're a long way from that", going on to note that "digital currencies are in their infancy".

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Fed Chairman Jerome Powell said at his press conference after the latest policy meeting that news about trade has been an important driver of sentiment since the Fed's previous meeting in May.

Interest-rate futures surged in response to the dovish remarks, and traders are now betting heavily on three rate hikes by the end of the year.

The S&P 500 (^GSPC) moved higher following the Fed's statement on Wednesday. According to Powell, they "expect to learn a lot more about the risks in the near term" and if data or the risk picture worsens, they have enough support within the central bank to ease quickly. "This feels more like the Fed sees the coming cut as more of an issue around inflation/insurance than growth".

It is unclear when the formal U.S.

The new economic projections showed policymakers' views of growth and unemployment were largely unchanged from March.

The Fed did not give in to pressure to change rates, leaving the federal-funds rate in a range between 2.25% and 2.5%.

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