 Dollar strengthened broadly in the wake of Fed’s policy decision overnight, although upside momentum remains measured. On the one hand, the updated dot plot maintained projection of two rate cuts in 2025. On the other hand, Chair Jerome Powell offered little to reinforce that view. Instead, he bluntly acknowledged that none of the rate path projections are held “with a great deal of conviction”. His message was clear: monetary policy will remain on hold until the inflationary effects of tariffs are more fully understood. Powell’s remarks were notably direct regarding tariffs, warning that a "meaningful increase in inflation" is widely expected in the coming months as costs ripple through supply chains. He stressed that Fed needs to observe how this pass-through plays out before taking action. “We’ll make smarter and better decisions if we just wait a couple of months,” Powell stated. The remark underlined a broader message of caution and patience, especially as the 90-day tariff truce edges toward expiration. With Fed now behind, attention turns to SNB and BoE, both announcing decisions today. SNB is widely expected to cut its policy rate to zero amid rising deflation risks and sustained strength in Swiss Franc. For BoE, the market is looking beyond an expected hold at 4.25% to the internal vote composition and tone of guidance. Most analysts still expect the next rate cut to arrive in August, but divisions within the MPC remain a key focus..... |
