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Fed keep policy as economic progress is made

Fed keep policy as economic progress is made

28 Jul 2021 09:51 PM

The Federal Reserve kept monetary policy unchanged, interest rates between 0.0% to 0.25% and the monthly bond buying scheme is $120 billion, meeting expectations. The Fed claimed that it made progress towards its taper goals, which caught the attention of the hawks. In the statement that accompanied the announcement, the Fed pointed out the vaccination rate has helped reduce the spread of Covid-19 but at the same time, the economic recovery depends on the course of the virus – this suggest they are trying not to get ahead of themselves and that they will continue to monitor the situation. The tone of the update seems to be mostly neutral with a hint of hawkishness.

The US dollar hit its session high as the news hit the headlines, but it has since retraced much of the positive move. It is still above the lows that were set one hour before the rate decision. AUD/USD has seen experienced a lot of volatility since the announcement, it initially tumbled to a one-week low and then rebounded to a one-day high. Gold is currently dancing around the $1,800 mark, having recovered from its short-lived move lower. The S&P 500 is now moving higher as it seems the update is best of both worlds, whereby the economy is heading in the right direction, but it is not improving so quickly that the tapering of the bond buying scheme will happen sooner than expected.

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