Federal Reserve Chairman Jerome Powell explains the decision to leave the policy rate, federal funds rate, unchanged at the range of 5.25%-5.5% and responds to questions in the post-meeting press conference.
Key takeaways
"Total scope of data suggest normalizing labor market."
"Job vacancies are still high by historical standards."
"Can't look to history as a guide to future."
"The picture is not one of a really bad economy, just spots of weakness."
"We don't change our approach according to political calendar."
"We never use our tools to support or oppose a politician or party."
"If we stick to our part, it benefits all Americans."
"That's what we believe and is how we always operate."
"Anything we do before, during or after election will be based on data, outlook and risks."
"We are a non political agency."
"We would never try to make policy decisions based on the outcome of an election that hasn't happened yet."
"There are always meaningful differences of views on FOMC."
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Next target comes at the 200-day SMA
AUD/USD managed to make a U-turn and reverse the earlier pullback to fresh lows near 0.6480, reclaiming the area beyond 0.6500 the figure on the back of further losses in the US Dollar.
EUR/USD sees the glass half-full after the Fed
EUR/USD left behind part of the weekly retracement and flirted with the mid-1.0800s in response to the increased selling pressure in the Greenback after Chair Powell hinted at a September rate cut.
Gold rises to daily highs as Powell unveils a probable rate cut
The precious metal maintains its bullish bias, and climbs to fresh tops past $2,430 per ounce troy after a September rate cut remains on the table.
Ripple rallies on hope of lawsuit win, XRP extends gains to $0.65
Ripple (XRP) is making headlines for the anticipated final ruling in the Securities & Exchange Commission (SEC) lawsuit. The lawsuit and SEC’s stance on XRP has acted as an influential market mover for XRP since the beginning.
FOMC: 'Twas the meeting before rate cuts
As was widely anticipated, the FOMC left the fed funds rate unchanged at the conclusion of today's meeting, but it opened the door to potentially easing policy at its next meeting on September 18.