EUR/USD: Fed's statement and its forecast for the US Economy

The Federal Reserve intends to use the full range of tools to support the US economy during this difficult time, thereby contributing to reach the goals of maximum employment and price stability.

The coronavirus outbreak causes tremendous human and economic difficulties in the United States and around the world. The virus and measures taken to protect public health (quarantine) have led to a sharp decline in economic activity and a sharp increase in job losses. At the same time, weaker demand and significantly lower oil prices are holding back consumer price inflation. Yet, financial conditions improved, partly reflecting policies to support the economy and the flow of loans to American households and enterprises.

The ongoing public health crisis (coronavirus) will greatly affect economic activity, employment and inflation in the short-term and pose significant risks to economic prospects in the medium-term. In the light of these events, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has survived the recent events and is on the way to achieving its maximum goals in the field of employment and price stability.

Moreover, the Committee will continue to monitor the impact of the information received on economic prospects, including information related to health (the pandemic), as well as global trends and moderated inflationary pressures, and will use its tools and act appropriately to support the economy. In determining the timing and amount of future adjustments to the monetary policy position, the Committee will evaluate the realized and expected economic conditions with respect to its maximum employment target and its symmetric inflation target of 2 percent. This assessment will take into account a wide range of information, including indicators of labor market conditions, indicators of inflationary pressures and inflationary expectations, indications of financial and international events.

To support the flow of loans to households and enterprises, the Federal Reserve will increase its holdings of treasury securities and agent residential and commercial mortgage-backed securities at least at the current pace in the coming months. This will maintain the smooth functioning of the market, thereby facilitating the effective transfer of monetary policy into wider financial conditions. In addition, the Open Market Bureau will continue to offer large-scale operations to conclude buy-back agreements overnight and on time. The Committee will closely monitor developments and is ready to adjust its plans accordingly.

(This is adopted unanimously at the Fed meeting on June 10)

Exchange Rates 11.06.2020 analysis

What happened to the EUR/USD pair 15 minutes after the Fed?

We keep buying from 1.1320 to a goal of 1.1480.

The Fed forecast for the year 2020: GDP – 6.5%, unemployment 9.3%, inflation + 0.8%, Fed rate 0.1%.

The Fed’s forecast for the year 2021: GDP + 5%, unemployment 6.5%, inflation + 1.6%, Fed rate 0.1%.

Source: EUR/USD: Fed's statement and its forecast for the US Economy

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