FOMC - FED Will Not Raise Interest Rates, 'Tapering' Starts in June!


After being awaited for the past few weeks, the question was finally answered at a focus event early this morning.

The May 2024 edition of the FOMC meeting is seen as an important point for investors to determine the direction of the market through the central bank's monetary policy guidance.

The Federal Reserve (Fed) is expected to keep the interest rate at 5.50% for the 6th consecutive meeting and then the follow-up speech by Fed Chairman Jerome Powell becomes more important.

According to Powell, the latest monitored indicators show that the economic activity of the United States (US) is at a satisfactory level with strong employment and a declining unemployment rate.

Inflation, which is an important indicator, has shown a decline over the past 1 year, but for the past few months, the target of achieving the 2% inflation objective has been a bit difficult.

Therefore, the members of the FOMC meeting agreed to continue to maintain the interest rate and Powell signaled that it is most likely that the interest rate increase will not happen at the next meeting, which is in June.

The percentage for the interest rate cut in July also decreased and the market placed expectations for the move to be implemented as early as September and a higher percentage in November.

Also announced, starting in June, monthly bond redemptions will be reduced from $60 billion to $25 billion.

This measure of quantitative tightening (tapering) is one of the methods used by the central bank in the monetary policy tightening phase which will lead to a reduction in the money supply in the economy.

Thus, this shows that the Fed is committed to lowering the inflation rate before it is fully prepared and confident for interest rate cuts to be implemented.

The US dollar showed a gloomy reaction after the meeting with the dollar index (DXY) falling from a high near 106.50 points to reach around 105.45.

For the period ahead, the US dollar is expected to move strongly following the Fed's projection that it will maintain its tightening policy for a longer period.

Investors are likely to take profits for previous trading positions before getting the best price for the next one.

Market focus at the end of the week will be directed to the US NFP employment data report for the latest indicators.