Forex analytics. The dollar raises the “hawks” – ForexNews.PRO
Hit the enemy with his own weapon. While Donald Trump, who uses the principle of “divide and rule,” criticizes the Fed, Jerome Powell is raising dissenters. If one FOMC member voted against the rate cut in October, then two members voted against it in December. At the same time, 6 of the 19 Committee members showed 4% in the forecasts for 2025. That is, four more “hawks” did not have the right to vote.
Donald Trump said that the reduction in the federal funds rate by 25 bps was quite modest. This number could be doubled. At least double it. However, Jerome Powell’s message to the president and his future successor showed that loosening monetary policy will be more difficult than it seems.
The chairman made it clear that the Fed is in a good position to wait and see, and rates are currently in a neutral range that does not stimulate or constrain the economy. This means that the bar for reducing them is high.
7 out of 19 FOMC officials do not see a single act of monetary expansion in 2026, four more voted for one. At the same time, the forecast for US GDP for next year was raised from 1.8% to 2.3%, and for inflation it was lowered from 3% to 2.5%. This is a rather paradoxical decision, because by definition, there cannot be weak inflation in a strong economy. However, when, according to Jerome Powell, officials see the picture the same way, but the risks are different, nothing is surprising.
Like, for example, the Fed chairman’s emphasis on the weakness of the labor market. According to him, the official employment figures are overestimated by about 60 thousand. The indicators look weaker than the central bank thought. These words became the “dovish” surprise that the market was counting on. The yield of treasuries collapsed after the initial rise, dragging the US dollar down with it.
In fact, in order to aggressively lower rates, Donald Trump and his people at the FOMC will need either a significant cooling of the economy or a return of inflation to the target. The first is not included in the plans of the White House, the second will be incredibly difficult to achieve.
In my opinion, the EURUSD’s reaction to the results of the last Committee meeting in 2025 turned out to be too emotional. Yes, the Fed resumed bond purchases at $40 billion a month to put pressure on treasury yields, and Jerome Powell expressed concern about the labor market. However, the bar for further rate cuts has been raised.
