Yesterday, all market participants closely followed the Federal Reserve decision on interest rates, as well as statements that were made later during a press conference by Fed Chairman Jerome Powell.
In general, the short-term market reaction to the purchase of the US dollar after the Fed's decision was quite predictable, but demand is unlikely to continue. The fall in the stock market and the slowdown in the US economy at the end of the year will continue to put pressure on the US dollar.
As it became known, the Fed has set the range of interest rates on federal funds between 2.25% and 2.50%. This decision was made by the Fed open-end operations committee by a 10-by-0 vote. The Fed raised its rates and signaled a slightly lower rate of their future increases. However, the committee still believes that some further gradual increase in interest rates will be needed next year.
As for the discount rate, it was also increased by 0.25 percentage points, up to 3.00%.
As I noted above, the economic outlook for growth rates was revised negatively, which is likely to put pressure on the US dollar after the short-term growth that we are seeing now.
The Fed lowered its forecast for US GDP growth in 2018 to 3%, while in September it was expected to grow by 3.1%. The Fed also lowered its forecast for US GDP growth in 2019 to 2.3% from the September forecast of 2.5%.
As for inflation, then the forecast for 2018 has been revised to 1.9% (the target value of the Fed) from the September forecast of 2.1%.
From positive statements, it should be noted that economic activity continues to grow at a strong pace, like household spending, which will support the economy in the future. The unemployment rate also remains low.
Speech by Fed Chairman Jerome Powell did not make adjustments to the statements of the committee. According to the Fed chairman, some difficulties have arisen since the September meeting, as global economic growth slowed down a bit in 2018, market volatility increased, and financial conditions became more stringent.
Powell also noted that most members of the Open Market Committee had lowered their forecasts for 2018, indicating a slightly lower rate of increase in interest rates next year than planned.
Fed officials are now expecting two rate hikes next year, not three.
The head of the Fed once again drew attention to the fact that the Fed will closely monitor the state of the economy to identify signs of the appropriateness of the policy. This will be done to support further economic growth.
As for the fundamental statistics, which was released yesterday afternoon, it was ignored by the market.
According to the data, the current account deficit of the US balance of payments in the 3rd quarter of this year once again increased and amounted to 124.82 billion US dollars against a revised figure for the 2nd quarter of 101.22 billion dollars. The US Department of Commerce expected the deficit to be $ 126.2 billion. The increase in the current account deficit of the balance of payments is largely due to the growing deficit of trade in goods by $ 23.95 billion, to $ 227.01 billion.
Sales in the secondary housing market in the US rose slightly in November.
According to the National Association of Realtors, sales in the secondary housing market in November 2018 increased by 1.9% and amounted to 5.32 million homes per year. Economists had expected sales of 5.17 million. However, compared with the same period in 2017, sales dropped immediately by 7.0%.
Problems in the housing market are increasing due to changes in monetary policy. Mortgage rates over the past year rose to 5%, which scares off potential buyers. The fixed rate for 30-year mortgage loans in November was 4.87% versus 4.03% in January.