Reference rates per Board of Governors-Federal Reserve System
Interest on Reserve Balances: 5.40%
Discount Window Rate: 5.50%
Effective Federal Funds Rate: 5.33%
Source: Board of Governors of the Federal Reserve System
Foreign exchange rates
AUD/USD=0.6677
NZD/USD=0.6121
USD/JPY=155.39
GBP/USD=1.2672
EUR/USD=1.0868
USD/CAD=1.3615
USD/MXN=16.6852
Source: x-rates.com
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Head of the Cleveland Fed advocates for waiting a little longer on rates.
Speaking before the Wayne Economic Development Council in Wooster, Ohio, Loretta Mester, president and chief executive officer of the Federal Reserve Bank of Cleveland, stated that the Federal Open Market Committee, the body within the Federal Reserve System responsible for setting monetary policy, needs greater confidence that inflation is moving toward the goal of two percent.
President Mester noted that over the first three months of 2024, the FOMC has seen no further progress on PCE (personal consumption expenditure) inflation. While the supply-side congestion healed enough to contribute to last year’s disinflation, progress on inflation will depend on moderating demand. President Mester noted that the FOMC can wait on data showing progress on inflation without concern that monetary policy is overly restrictive.
President Mester also pointed out that current restrictive policy will continue to moderate growth although progress toward reducing inflation will be slower than last year. President Mester also believes that a slowdown in wage growth will pass through to lower price inflation while declines in rent from new leases will pass through to lower inflation in housing services.
According to President Mester, once the FOMC is confident that inflation is moving to two percent, it will be in a position to normalize policy to a neutral level as the economy returns to price stability and maximum employment.
My takeaway…
Members of the FOMC have been expressing similar sentiments regarding waiting a little longer for data that would substantiate loosening monetary policy. I believe that this FOMC sentiment may contribute to foreign exchange rates not fluctuating much where dollar weakening is observed. Off course there are other factors that traders will have to consider, primarily demand for the USD or changes in bond market sentiment that impacts bond yields.
Alton Drew
16 May 2024
Disclaimer: This post should not be treated as investment/trading or legal advice. Please consult your investment or legal advisor before making a trade or investment decision.
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