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    The Fed May Hold Zero Interest Rate Until 2022

    Abstract:​June 10th (EST), US Federal Reserve announced its decision to keep Federal Fund interest rate’s target range at 0%-0.25% unchanged, much in line with market expectation, and the current rate is estimated to remain until the end of 2022.

      June 10th (EST), US Federal Reserve announced its decision to keep Federal Fund interest rate‘s target range at 0%-0.25% unchanged, much in line with market expectation, and the current rate is estimated to remain until the end of 2022. The Fed will also keep buying bonds at least with the present speed for the next few months in order to reduce the pandemic’s short-term impact on business activities, employment and inflation.

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      According to the Feds latest interest rate dotplot, most FOMC members expected interest rate to remain at current level till the end of 2022, with only two estimating a rise from zero rate in 2022. This suggests the easing monetary policy will last for at least 18 months.

      After the meeting, the Fed also released this year‘s first economic forecast, which projected the U.S. real GDP growth rate median to be -6.5% in 2020, a significant decrease from the previous forecast of 2% made in last December; It’s estimated that the real GDP growth rate median in will be 5% in 2021 and 3.5% in 2022.

      With the release of Fed‘s rate decision, the rates of EUR, GBP, AUD, CAD and NZD against USD in the currency market all hit several month’s high. Aussie dollar recorded the largest growth, as AUD/USD once surged over 1% to the highest level since July, 2019. EUR/USD breached above 1.14 to nearly 3 months high.

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      Despite the unexpected rise of US May employment data, the current jobless rate still sits at record high. As May employment report showed great instability of the overall environment, the Fed wasnt able to know whether the report indicates a future trend, so the next few months will be crucial for determining the real economic situation.

      Analysts noted that currency pairs including EUR/USD, AUD/USD, NZD/USD and USD/CAD are rising over the fair level and will likely drop back later on.

      To learn more about forex industry dynamics and market trends, please visit WikiFX official site or download WikiFX App.

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