The Fed left US rates unchanged - at 3.75-4%. The decision was announced on the evening of October 28. US inflation is still above the 2% target.
The vote was split. Two committee members wanted to raise rates by 0.25 percentage points. For the Fed, such a disagreement is rare.
The Fed rate is the price of money in dollars. When it is expected to be higher, the dollar usually strengthens. For a trader, this means sharp candles on USD/JPY and other pairs at the moment the decision is released.
Who voted against?
What came out. The rate was left unchanged. Lisa Cook (member of the Fed Board of Governors) and Beth Hammack (President of the Cleveland Fed) dissented - both wanted a 25 basis point tightening (0.25 percentage points).
In the decision text, the committee described the economy as follows:
- inflation - "remains elevated";
- domestic demand - "solid";
- productivity and capital investment - strong growth;
- employment - growing in step with the labor force;
- unemployment - barely changed.
Why was the rate left untouched?
Why so. The Fed decided not to raise while it gathers more data.
- The hikes already made are working. So said Fed Chair Kevin Warsh.
- December became softer. With this, Warsh cut expectations of an aggressive move of 50 basis points in December at once.
How did the market react?
Reaction. Currencies diverged immediately after the decision.
- USD/JPY - 158.28, up 0.21% after the decision, with a move toward 158.50: the yen is weakening;
- AUD/USD - 0.7056, a monthly high;
- in the Asian session the pair reached 0.7050, a high since September 23, after strong inflation in Australia.
From there also come bets on a November hike from the RBA (Reserve Bank of Australia).
What next?
What next. On Friday, October 30, comes the Bank of Japan decision - it is the one that sets the fate of the yen while the Fed is on pause. The date is easy to keep in view in the economic calendar.
Key point: the dollar is left with two contradictory signals. The rate was not raised, but there is already a hawkish minority within the committee.
Were you holding the yen at the moment of the decision?
Two dissenting votes - and a calm statement turns into a half-figure move on USD/JPY within minutes. Anyone who was in a position knows: such candles either feed you or take you out on a stop-loss. On a funded account, a second question is added - whether the program allows trades in the window of the rate decision release and how the daily loss is calculated. For some this is normal, for others it is grounds to close access. Before the Bank of Japan on Friday, it is reasonable to check these points.