Dollar under pressure as pace of USA inflation slows

"Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely", the Federal Open Market Committee said in a statement.

The Fed also outlined its plan to reduce its $4.2 trillion (€3.7tn) portfolio of Treasury bonds and mortgage-backed securities, chiefly purchased after the financial crisis hit. The Fed said it will have a balance sheet "below that seen in recent years but larger than before the financial crisis" because banks need for higher reserves at the Fed.

In fact, the Fed has said in the past that if it reduces the balance sheet by $500 billion, it is the equivalent of two rate hikes, he pointed out.

That's despite a rough patch for the U.S. economy. The basic idea will be that the Fed will stop reinvesting the principal of securities when they mature.

The rate forecast, based on individual projections from each member, envisions three more rate hikes in 2018 and three more in 2019.

The average 30-year fixed mortgage had a rate of 4.02% on Weds., June 14 - the lowest since November 16, 2016 - and an average of 0.24 discount and origination points. In a show of confidence, the Fed also upgraded its economic growth forecast and unemployment for the 2017. Fed officials expect the rate to decline to 4.2 percent next year.

The most interesting thing about this meeting is that it comes at a time when the United States dollars has endured a less than stellar jobs report (some decried it as disastrous, ) and with inflation possibly slowing as forecasts for last month's CPI see it dipping from 2.2% back to 2.0%.

Earlier on Wednesday, the Labor Department reported consumer prices unexpectedly fell in May, the second drop in three months.

The Fed's preferred measure of underlying inflation has retreated to 1.5 per cent, from 1.8 per cent earlier this year, and has run below the central bank's 2 percent target for more than five years.

Given recent political turbulence in Washington, it's unclear if President Donald Trump will get his wish for Congress to pass dramatic tax cuts and infrastructure spending which could further stimulate the economy. She and her colleagues "continue to expect that the ongoing strength of the economy will warrant gradual increases in the federal funds rate" to sustain a healthy labor market and price stability.

  • Zachary Reyes