The hawkish Fed did not help the dollar

Wednesday ended with quite an interesting turn in the markets after the decision Federal Reserve and her boss's conference Jerome Powell. Ultimately, the dollar appeared to decline, and in a sense, it could gain: gold, silver, bitcoin. US stock prices also soared.

The Federal Reserve announced at its December meeting that it would end bond purchases in March, paving the way for three interest rate hikes by the end of 2022. Fed policymakers voiced concerns about continued high inflation in the context of continued labor market recovery.

The US central bank doubled the pace tapering up to $ 30 billion per month, which may lead to the end of the program in March 2022. The US central bank noted, however, that risks to the economic outlook remain due to the mutation of the omicron coronavirus and its possible impact on the economy. Fed officials reiterated that interest rates would be kept at record lows until maximum employment was reached. Officials raised the inflation forecast for 2022 to 2,6%. from 2,2 percent predicted in September, while the unemployment rate is expected to drop to 3,5 percent.

The American market will not care about the increase?

The Fed announced what the market could expect in terms of interest rates and tapering. It seems, however, that investors were not so positive about the economic situation in the US and the labor market. Importantly, the improvement in employment and economic growth in 2022 may take place amid falling inflation, which may ultimately increase the purchasing possibilities of American consumers. This may justify the positive reaction of the US stock market. It is worth recalling that in the decades-long history there was no case that the beginning of the cycle of interest rate increases would cause any slump. The Fed announces interest rate hikes as it sees that the economy is in a very good condition and will easily bear the higher interest rate on loans.

The dollar was not happy

In the US dollar market, the observed return can be viewed as "Buy rumors, sell facts". Jerome Powell mentioned during the press conference that the projections of members FOMC they are not binding declarations, but expressions of opinion, and everything will depend on market conditions. After the Fed's decision EUR / USD exchange rate it seemed to turn abruptly from 1,1220 to 1,1300.