EUR/USD, USD/JPY, DXY flows: Fed shifts gears, sees quick, short dash to get back up to the curve on inflation
Clear shift in emphasis to catching up to the curve on elevated inflation
Dots suggest the Fed is minded to catch up with a quick string of corrective tightenings this year before hoping to plateau at less accommodative FF
Speed of adjustment bolsters dollar, despite less hawkish long projections than priced in - more hikes soon are concrete
Some kneejerk flattening suggesting some credibility gain
FOMC raises rates by 25bp as fully expected and does so unanimously, with emphasis on elevated inflation given unqualified prominence and with a clear tightening bias for this year.
16 of 18 project at least one more quarter-percentage-point hike by the end of this year, 4 see 2 hikes, and 2 unchanged, with a median at 4.1%, same at end 2027 and 3.9% end 2028, with 3.6% end 2029.
This marks a clear shift from the Fed and a sort of acknowledgement that it needs a quick string of 2-3 hikes, including todays, to get back up with the curve on inflation, before then expecting/hoping policy to level out at a higher level.
Pretty positive dollar reaction from the nearby Fed validation that is actually as or even more more aggressive in terms of skew than the market for this year , even if it is then less hawkish into next year. More concrete now trumping less already signalled ahead further out. A little bit of post announcement curve flattening maybe suggesting the Fed getting a bit of credibility back.
EUR/USD levels down to the next half figure reference at 1.15, and cable (UK MPC the extra tightening laggard) seeing fresh downside pressure. USD/JPY has the upcoming BoJ meeting to wait for for ultimate net impact.