Federal Reserve Interest Rate Decision : Fed cut rates by 0.25%

The Federal Reserve has cut interest rates by 25bps to 4%-4.25%, which was in line with expectations. However, policymakers also see two more rate cuts coming before the end of the year, this is up from its projection in June as the Fed responds to concerns over weakness in the jobs market. Only new Governor Stephen Miran dissented in favour of a 50 bps cut. 

The more dovish stance from the Fed comes as policymakers see inflation ending 2025 at 3.1%, unchanged from the forecast in June, and growth at 1.6% by the end of 2025, up from 1.4%. There was a notable change in how the Fed assess the labour market, scrapping the word “solid”. It was the first time this year that the Fed hadn’t said the labour market was solid. 

DOLLAR INDEX (DXY):

The US Dollar Index was traing 0.1% higher ahead of the release. Post the rate decision, we have seen the Dollar Index fall -0.3%, before recovering.

 DOLLAR vs YEN (USD/JPY):

If we take a closer look at the technicals, we can observe how USD/JPY price was trading around 146.30 before the decision, and post the decision we have seen price action spike lower to 145.50 before recovering. The price failed to sustain a break below the 146.00 support.

S&P 500 (SDX):

The S&P 500 has also seen a direct impact from this Fed rate announcement, as we saw the price trading at just over 6600 before the announcement, and currently we are trading at 6570. This marks a fall of over 0.5% within the hour.

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