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As expected, the Federal Open Market Committee (FOMC) kept interest rates on hold at 5.25-5.50% during their May meeting.

Still, U.S. central bank officials agreed to slow down the pace at which it is reducing bond holdings on their balance sheet, slightly loosening monetary policy in effect.

  • FOMC kept interest rates unchanged at 5.25-5.50%
  • FOMC slashed the monthly roll-off in Treasuries from $60B to $25B
  • FOMC maintained official roll-off target of $35B for mortgage-backed securities

In their official statement, the FOMC emphasized:

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

Link to official FOMC statement for May 2024

Interestingly enough, the Fed tweaked its statement from previously citing that risks to achieving price stability and full employment “are moving into better balance” to saying that the prospect of reaching both “have moved toward better balance over the past year.”

Market Reactions

U.S. dollar vs. Major Currencies: 5-min

FOMC Holds Rates Steady, Reiterates ‘Lack of Progress’ on Inflation

Overlay of JPY vs. Major Currencies Chart by TradingView

Dollar pairs were treading carefully ahead of the FOMC rate decision, staying mostly in consolidation despite a couple of downside surprises in leading jobs indicators.

The U.S. currency dipped during the actual announcement and carried on its bearish trajectory until Fed Chairperson Powell’s testimony. From there, another wave lower ensued before profit-taking allowed the dollar to recoup some of its losses a few minutes later.

But before prices could make it back to their pre-FOMC levels, the dollar took another hit across the board, most notably against the Japanese yen when the BOJ reportedly intervened in the forex market.

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