In a major shift in its perspective, the Fed also now expects to raise borrowing costs only once more through 2021, and no longer anticipates the need to guard against inflation with restrictive monetary policy.
The dollar index, which measures the greenback against six major currencies, fell 0.6 percent to 95.806, its lowest since Feb. 4.
· “The dollar has come under pressure against a large number of currencies around the world,” said Chuck Tomes, associate portfolio manager at Manulife Asset Management in Boston.
“Overall it seems the Fed was able to solidify their dovish view as there are no rate hikes priced in for this year and only one rate hike for2020,” he said.
“That was more dovish than people were expecting at the margin, even though the market was looking for a dovish Fed today,” said Tomes.
· “The fact that they’ve announced balance sheet runoff ending I think is certainly quite dovish as well,” said Gennadiy Goldberg, interest rate strategist at TD Securities in New York.
· The yield on the benchmark 10-year Treasury note dove to its lowest level since January 2018 after the Federal Reserve said that it’s no longer likely that it will hike rates again this year.
The yield on the benchmark 10-year Treasury note sank 8 basis points to 2.528 percent, while the yield on the 5-year Treasury bond dove 10basis points to 2.328 percent, its lowest level since February 2018. The short-term 3-month Treasury bill traded with a yield of 2.473 percent and the 2-year note rate dropped 7 basis points to 2.4 percent. Yields rise as bond prices fall.
· Weakening Chinese and European economies are acting as a deterrent to U.S. growth, Federal Reserve Chairman Jerome Powell said Wednesday.
Speaking just after the central bank decided to hold the line on interest rates this week and likely maintain that stance through the year, Powell said that an otherwise strong domestic picture is getting dented from abroad.
"Now we see a situation where the European economy has slowed substantially and so has the Chinese economy, although the European economy more," he said in response to a question from CNBC's Steve Liesman. "Just as strong global growth was a tail wind, weaker global growth can be a headwind to our economy."
The Fed reduced its outlook for GDP to 2.1 percent in 2019 from a 2.3 percent forecast in December.
That reduced estimate came as the policymaking Federal Open Market Committee voted to keep the benchmark federal funds rate in a range between 2.25 percent and 2.5 percent.
In its post-meeting statement, the committee characterized the labor market as "strong" but said the "growth of economic activity has slowed," a U-turn from January when the FOMC said activity "has been rising at a solid rate."
Powell said Fed members continue to see the basic picture in the U.S. as good.
"Our outlook is a positive one … FOMC participants continue to see growth this year around 2 percent, just a bit below what we saw back in the end of last year," he said. "Part of that is seeing that underlying economic fundamentals are still very strong. You have strong labor markets by most measures, you have rising incomes, you've got very low un
· The Federal Reserve on Wednesday unveiled a long-awaited plan to stop scaling back the vast portfolio of bonds it built up to spur an economic recovery from the 2007-2009 financial crisis and recession.
By September, the U.S. central bank said its current practice of allowing up to $50 billion of Treasuries and mortgage-backed securities (MBS) to roll off its balance sheet each month will come to an end if the economy evolves “about as expected.”
When completed the Fed would still likely have at least $3.5 trillion in bonds, more than four times the roughly $800 billion it had heading into the crisis more than a decade ago. The Fed currently holds about $3.8 trillion in bonds.
· European Union leaders meet in Brussels on Thursday to give Prime Minister Theresa May an offer to delay Brexit beyond March 29, on condition that she can finally win over her many opponents in parliament next week.
Increasingly embattled, she asked the EU on Wednesday to postpone Brexit until June 30 to give her time to secure a deal in parliament and avoid an abrupt departure next week that could spell economic chaos.
“We could consider a short extension conditional on a positive vote on the Withdrawal Agreement in the House of Commons,” summit chairman Donald Tusk said in a letter inviting all 28 EU national leaders to Brussels talks.
Raising the stakes, France threatened to reject May’s request and the EU’s executive said Britain had to be out by May 23 to avoid having to take part in European Parliament elections.
· Oil prices rose on Wednesday, with U.S. crude topping $60 a barrel for the first time in about four months, after government data showed the American stockpiles of crude oil and refined fuels plunged last week.
WTI has rallied 32 percent this year after losing nearly half of its value in the final months of 2018. Brent is also up more than 27 percent year to date, boosted by production cuts from OPEC and U.S. sanctions against Iran and Venezuela.
U.S. West Texas Intermediate crude futures settled 80 cents higher at $59.83 per barrel, after earlier topping $60 and hitting its highest level since Nov. 12. The more heavily traded WTI contract for May delivery peaked at $60.28 a barrel.
Brent crude futures rose 89 cents, or 1.3 percent, at $68.50 a barrel. The international benchmark for oil prices rose as high as $68.57, setting a new high going back to Nov. 13.
Reference: CNBC, Reuters
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