US Dollar Hit Hard as FOMC Members Warn Rate Hike Pace Overstated
- FOMC members warn that forecasts overstate the rate hike pace
- No support found in minutes for Yellen’s 6-month timeline
- US Dollar falls to a 4-month low against the Aussie
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Several Fed officials warned in the March Federal Reserve meeting that forecasts overstated the rate hike pace, and the minutes from the meeting failed to support Chair Yellen’s comment that a rate hike may commence six months after the end of quantitative easing.
The minutes also reported that FOMC participants saw a slack persisting in the labor market, but the Fed members also expect a gradual decline in unemployment. Regarding inflation, most Fed members saw inflation rising towards the 2% goal.
Since Yellen mentioned the possibility of a rate hike in her press conference following the March meeting, speculation that the Fed may raise rates by the first half of 2015 has grown. Yellen has since tried to counterbalance her hawkish forecast by saying at the end of March that the economy will need extraordinary support for some time. Today’s minutes may have further supported the theory that Yellen’s ‘six-months’ comment was more of an off the cuff response to a reporter than a calculated timeline supported by the FOMC.
The Australian Dollar rallied just about 50 pips following the release of the minutes and set a new 4-month high at .9399 at the time of this writing. Currency Analyst David Song said AUD/USD may face a larger pullback in the coming days, as it nears trendline resistance.
-- Written by Baruch Spier, DailyFX Research. Feedback can be sent to firstname.lastname@example.org .
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