Fed won't rush to raise interest rates, the euro falls

Fed won't rush to raise interest rates, the euro falls

In this picture illustration, dollar, euro and Pound banknotes are seen

The U.S. Federal Reserve said it would not rush to raise interest rates even as it started unwinding its pandemic-era stimulus, but lost ground on the euro and sterling on Thursday.

The Fed announced a $15 billion monthly cut to its 120 billion monthly purchases of Treasuries and mortgage-backed securities, but Chairman Jerome Powell said the US central bank would be patient in decisioning when to raise its overnight interest rate from zero levels.

The euro gained 0.29% on Wednesday after the announcement, gaining 0.29% that day.

The Fed can defer rate rising as a result of fears that high inflation could last longer than it initially projected, market attention is now getting started to be turned to how long the Fed can defer rate rising.

The Chairman said that the Federal Open Market Committee meeting was much more about quantitative easing than interest rates but this will be the last meeting in which that reasoning will hold. From here on, future FOMC meetings will return the focus back to the Fed s interest rate strategy and tactics, said Paul O Connor, head of multi asset at Janus Henderson Investors in emailed comments.

A busy two weeks of central bank meetings comes to an end, with the Bank of England meeting on Thursday when it could become the first of the world's big central banks to raise rates since the coronaviruses hit.

There is less consensus around the BofE's decision unlike the Fed where the market and observers were all but certain that it would taper the stimulus on Wednesday.

The Aussie dollar climbed to an estimated 0,77463 dollar on Tuesday, helped by the softer dollar, but has more work to recover from its 1.2% fall on Tuesday, as the Reserve Bank of Australia took a dovish tone at its key meet.

The dollar was within a good leap of the dollar's multiyear high of 114.69, hit last month.