Dollar rose sharply on Wednesday after the release of the Fed's updated rate forecast. The dollar index gained about 1% and rose above 91.3 for the first time since May 6.
The Fed is forecasting earlier interest rate hikes as the economy accelerates and inflation rises after the pandemic. The Fed also discussed scaling back its bond purchases.
Following the results of the meeting on Wednesday, the Fed left the key rate range unchanged (0-0.25% per annum), but for the first time since the beginning of the crisis, it increased rates on money market operations.
The Fed raised its inflation forecasts for this year and next, and also signaled a likely interest rate hike in 2023.
The median forecast of FOMC members now suggests two rate hikes by the end of 2023. In March, most executives expected rates to remain unchanged until the end of 2023.
Many market participants expect that the acceleration of inflation may force the Fed to start discussing the likelihood of starting to wind down the stimulus, including the program of buying bonds in the amount of $ 80 billion and mortgage bonds in the amount of $40 billion a month. On Wednesday, the Fed maintained its $120 billion-a-month bond-buying program.
During a press conference, Fed Chairman Jerome Powell said that "inflation may be higher and more stable" than the central bank expects due to the unprecedented nature of the economic opening process. However, the Fed's forecasts do not suggest a steady and rapid increase in inflation after the end of this year.
Powell confirmed that the Fed had discussed a slowdown in bond purchases, but did not say when it would begin, adding that the necessary conditions for such a reduction have not yet been met, and the Fed will warn of any changes in advance.