For the time being, FOMC left interest rates unchanged

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The Federal Open Market Committee (FOMC) meeting was held during two days, June 18 and June 19, 2019, and opposed to investors’ expectations, but especially against the US President Donald Trump wishes, the interest rates were left unchanged and remained at 2.25% to 2.5% p.a. According to the DXY dollar index the US dollar (USD) exchange rate has declined.

During the European trading morning on June 20, 2019, at 9:07 CET, the US dollar (USD) exchange rate, measured by the US Dollar Currency Index (DXY), was valued at US$96.83 points with a daily drop of – 0.30%. Thus, on a given day and time, the EUR/USD global currency pair traded on the Forex market at a mutual exchange rate of US$1.1269 per EUR, with a daily EUR + 0.40% appreciation against the USD. The US dollar also weakened against the Japanese yen (JPY), when the exchange rate of this currency pair USD/JPY already fell below 108 JPY for USD. Currently on 20 June, 2019, at 9:12 CET on the foreign exchange market the US dollar was valued at JPY 107.71 per USD, with the daily weakening of the USD by – 0.35%.

According to economic rapporteurs, investors are becoming increasingly nervous and their concerns are growing regarding the current unclear situation in relation to the US trade disputes, primarily with China, and to a lesser extent with India. There is also a potential threat of imposing tariffs on production of the automotive industry imported from the European Union. These investor concerns are then exacerbated by the current US central bank’s Federal Reserve System monetary policy, when the US President Mr. Trump himself criticizes this US financial institution and, in particular, its president, Mr. Powell. However, according to financial market experts, it is precisely President Trump’s behaviour and his efforts to dismiss the current Federal Reserve Systém (FED) chairman, Mr. Jerome Powell, that could cause considerable turbulence in the US financial markets.

The FED decision on interest rates, along with a commentary on the conduct of the meeting, was presented at the press conference on June 19, 2019 by its chief, Mr. Jerome Powell, who also told President Trump that his mandate is for four years and, that he intends to fulfill it until the end of his term. The FOMC members voted, unlike the economic rapporteurs expected, the way that none of the nine FOMC members were in favor of reductions, 8 members were in favor of maintaining the current level, and one member insisted on the interest rate growth.  However, the FED chief, Mr. Powell, said in his speech that the FOMC is leaving the door open and will return to the question of a possible interest rates decrease in the near future. At the same time, the FOMC members’ vote showed that 8 of their 9 members are willing to decrease interest rates one more time until the end of 2019.

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