At its last meeting headed by Janet Yellen, the FOMC decided to keep interest rates unchanged, but kept the door open for a rate increase in March. In Canada, GDP grew +0.4% mom in November, entering the basket of data supporting the case for the BoC to proceed with another rate hike soon.
The dollar traded mixed against the other G10 currencies on Wednesday, although it gained somewhat ahead and after the FOMC decision. The greenback underperformed CHF, CAD and GBP in that order, while it gained against JPY, NZD and AUD, with JPY being the main loser, perhaps on the back of BoJ Deputy Governor Iwata’s comments during the Asian morning Wednesday that there is a misunderstanding in the market that the BoJ will exit its ultra-loose policy soon. The dollar traded virtually unchanged against EUR, NOK and SEK.
Yesterday, at its first policy meeting for 2018 and the last chaired by Janet Yellen, the FOMC decided to keep interest rates unchanged and made little changes to the statement accompanying the decision. Off course they removed the parts referring to the hurricanes, but what appears interesting to us is that they put the word “further” next to “gradual increases”. Specifically, officials noted that “The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate”. In December, the sentence was the same but without “further”. Another point that caught our attention was that policymakers now expect inflation to move up this year, replacing December’s part that inflation is expected to remain somewhat below 2% in the near term.
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