The FED decision was announced on Wednesday at 20 Polish time. The dollar's first reaction was quite violent and ambiguous. The eurodolara course, as well as the value of the American currency in PLN, scored a jump down and up, and only with time the situation clarified. In the following hours the dollar strengthened, but on Thursday in the morning it weakens again and the courses return to levels from 24 hours ago.
On Wednesday evening, the eurodolara course suddenly jumped up to fall clearly later
|
STOOQ.PL
The dollar gained value overnight, but on Thursday morning the USD/PLN exchange rate fell
|
STOOQ.PL
It can be seen that investors on the currency market have been waiting for the FED decision, but after analyzing the bank's message, forecasts and the current situation, they did not consider it a breakthrough. It is worth noting, however, that as a rule, The lower the interest rates, the weaker the currency of the country.
On Thursday before noon, the dollar was valued at PLN 3.59and at the beginning of August the course oscillated around PLN 3.65.
Wall Street reaction to the FED decision on interest rates
Interest rate discounts in the US were announced before closing the American stock exchange. Wednesday's session ended with a predominance of light declines, but the Dow Jones index, after a foot reduction expected by the market, gained over 250 points at the end of the day.
Wednesday's quotations of the Dow Jones Industrial
|
STOOQ.PL
Dow Jones Industrial at the closure increased by 0.57 percent. S&P 500 at the end of the day fell by 0.1 percent, Nasdaq Composite reduced by 0.33 percent.
The shares of technology companies recorded declines after the FED decision, because investors carried out profits from previous days. The quotations went down, among others Nvidia, Oracle, Palantir and Broadcom.
On the other hand, the actions that would benefit from lower interest rates were in the plus, which strengthened Dow Jones and a wider market. Walmart, JPmorgan and American Express grew.
Why did the Fed reduce interest rates right now?
The decision to lower interest rates was made in response to the increasingly disturbing signals from the labor market. As Bloomberg indicates, in July two members of the Open Market Committee (FOMC) were in favor of cutting the feet, indicating weakening employment data.
The key moment was the August statement of Jerome Powell during the Symposium in Jackson Hole. The head of the FED admitted that The labor market is in “strange balance” and warned against the risk of rapid growth of unemployment.
Inflation in the USA – still under the magnifying glass
Although the decision to lower interest rates was mainly dictated by the situation on the labor market, the Fed does not lose sight of inflation. Jerome Powell believes that the impact of customs tariffs on price increases may be temporary, but many members of the bank's management board are afraid that inflation, especially in the service sector, may prove to be more persistent than previously forecasted.
The reduction of interest rates is a signal that Fed is trying to balance its activities in the face of contradictory challenges – slowdown on the labor market and persistent inflation. However, this decision may have a risk. Too aggressive loosening of monetary policy can fuel price pressure, while too careful actions can deepen problems on the labor market. All eyes will now be turned to subsequent Fed meetings and macroeconomic data that will decide on the further steps of the Central Bank.
