USD/JPY retreats after Fed delivers 50 bps rate cut

The US dollar fell to a low of 140.80 on Wednesday when the Fed announced a 50 basis point cut in interest rates, just as the markets were getting ready for Fed Chair Powell’s press conference. In an effort to meet market expectations, US central bank policymakers have lowered interest rates for the first time in more than four years with this move. In March, investors had first anticipated a rate cut from the Fed.

The Federal Reserve’s dot plot, which is a component of the FOMC’s Summary of Economic Projections, has been updated to reflect a lower rate outlook than the central bank had previously provided. The Fed Funds rate is now expected to reach 4.4% by the end of 2024 and 3.4% by the end of 2025, according to the Fed’s median policy expectations, down from 5.1% and 4.1%, respectively.

Examining the Fed’s notes in greater detail reveals that officials now expect US GDP growth to stay around 2.0% through 2024, which is a decrease from the June forecast of 2.1%. By the end of 2024, Fed officials anticipate that the US unemployment rate will have stabilized at 4.4%.

The world’s markets are now focused on Fed Chair Jerome Powell’s next news conference, since the Fed has matched market expectations for rate cuts.