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April 29, 2021

FOMC Results Not Disappointing, Fed Expects Expectations

 The Federal Reserve (Fed) met market expectations by keeping interest rates unchanged at the 0-0.25% target range and buying bonds at $ 120 billion a month despite acknowledging there was rising inflation and a growing economy.

Following the policy announcement, policymakers noted that indicators of economic and employment activity had strengthened amid progress in vaccination programs and strong policy support.

However, they also stressed that pandemics continue to weigh on the economy, and risks to the economic outlook remain.

Moreover, the Fed also noted that the sectors worst affected by Covid-19 remain weak, but have shown improvement.

Meanwhile, Fed Chairman Jerome Powell told in a press conference after the meeting that the recovery recorded was faster than expected but it remained uneven and far from fully complete and the economy was also still far from the central bank’s target.

Powell stressed that the rise in inflation is temporary because there are still significant shortages in the labor market. However, if inflation rises above the 2% target continuously in a material way, then the Fed will use its monetary tools.

As a result, Powell reiterated his earlier statement that it was not yet time to discuss reducing asset purchases and it would take some time before the Fed could see further progress.

Thus, the Fed will not change the bond purchase rate until greater progress is made in its employment and inflation targets.

Following the Fed's decision, the US dollar traded lower against most major currencies, particularly the euro, which soared to its latest high since February.