Dollar in the world is at six-month highs due to the “Fed effect”

He financial market experienced significant currency movements on Thursday, with the dollarreaching your level highest in six and a half monthsagainst a basket of currencies, after the communication of the Federal Reserve of the US about its long-term restrictive monetary policy, despite keeping rates stable.

He Swiss francin contrast, experienced a drop after the Swiss National Bank decided to keep its rates unchangedbreaking the upward trend that has been maintained since March 2022.

The pound sterling also faced a decline, marking its lowest level since April, pending the monetary policy announcement of the Bank of England. The Japanese yen, on the other hand, was at its lowest point since November, ahead of the monetary policy meeting of the Bank of Japan scheduled for Friday. In Europe, the central banks of Sweden and Norway met expectations by raising rates by 25 basis points.

The dollar index, which evaluates the performance of the US currency against six other currenciesshowed a notable increase to 105.68 units, its highest level since the beginning of March. The Federal Reserve kept interest rates within the range expected by the market, but reinforced its restrictive monetary stance, seeking to address inflation without damaging the economy or generating massive job losses.

In summary, Currency markets experienced significant changes in response to central bank decisions and monetary policy expectations, with the dollar strengthening and other important currencies showing important variations in their prices.

Inflation: how long will aggressive monetary policy last?

The commonly expressed idea about the Federal Reserve in recent months is that interest rates will remain “higher for longer.” This implies that even after the Fed conclude its current cycle of rate hikes and begin the reduction process, Rates will remain higher than what the Fed considers necessary to maintain economic growth with 2% inflation.

The exact term “more time” is central to investor debates about future Fed policy. However, at its recent meeting, the Fed offered new insight into its response: at least three more years.

Along with its decision to keep rates between 5.25% and 5.5%, The Fed released updated economic forecasts for interest rates, unemployment, growth and inflation.

The dot plot, which reflects officials’ forecasts for rates in the coming years, indicated that most Fed officials They believe another rate hike will be necessary this year.

The CEO of JPMorgan Chase & Co., Jamie Dimon, stated that the Fed may have to continue raising its benchmark interest rate in the coming months to combat persistent inflation. Dimon expressed that the central bank arrived “a day late and a dollar short“to begin adjusting rates, and the rapid increases of the last 18 months were “catching up“.

“The chances of them having to go up more than they are today they are older“Dimon stated.”I’m talking about four months from now, six months from now, that inflation will be at 4% and will not decrease for various reasons.“.