The Fed decided everything. Overview for 16.12.2021

EURUSD continues analysing the Fed meeting results while waiting for the ECB session. 

The major currency pair is trying to remain as stable as possible. The current quote for the instrument is 1.1305.

So, this week’s key highlight is finally over. The US Fed had a meeting and decided on the interest rate, which remained intact, just as expected. At the same time, the regulator doubled the QE taper pace, from $15 to $30 billion, to terminate the programme as early as March 2022. 

As for the rates, the Fed said it saw three rate hikes in 2022. It was quite surprising that the “greenback” didn’t skyrocket on this information because market players expected two hikes for a total of 50 basis points. 

The regulator is sure that the benchmark interest rate shouldn’t be raised until the QE programme is over. Moreover, the regulator doesn’t know how much time should pass between the closure and the first rate hike.

In the comments, the Fed was talking about the general state of the economy. For example, the regulator believes that the post-pandemic labour market will be different and is rather unlikely to get back to its pre-pandemic numbers. The Fed doesn’t expect big numbers of the working population for a while longer but it can’t wait for too long – soon it will be the time to revise the monetary policy to handle inflation. 

The Fed said that because of high inflation the rates may be raised before the labour market reaches its high. In 2022, inflation is expected to remain above 2%.

So, the Fed’s stance is more aggressive and that’s good – inverts expected something like that. 

Now their attention is slowly switching to the ECB meeting that is scheduled for the evening.