29.07.202111:26 Forex Analysis & Reviews: Dollar slips amid Fed decision to maintain a soft policy

Dollar fell yesterday on the news that the Federal Reserve left interest rates unchanged at 0-0.25%. The central bank said the US economy has made some progress, but it is not enough to justify a change in monetary policy.

With regards to bond purchases, the members are still in discussions on how and when they will scale back the volume.

Back in December last year, the Fed said it would continue buying $ 80 billion worth of Treasury securities and $ 40 billion worth of mortgage-backed securities. They said this will continue until there is progress in price stabilization and maximum employment. Fortunately since then, progress has come, not to mention the purchases helped ensure smooth market operations and favorable financial conditions.

Unsurprisingly, the central bank also continued to reiterate their view that the rise in inflationary pressures will be temporary. They claimed that inflation rose mainly due to transient factors and overall financial conditions remain favorable.

But some analysts point out that the recent Fed statements may have some hawkish tinge on it, as it prepares the markets for a possible tightening of policies. Avery Shenfeld, Chief Economist of CIBC, said the markets will have to wait a bit before they receive any new guidance on monetary policy. He noted that if the economy and labor market continue to improve, the meeting in September will most likely end with adjustments on the policy. There may also be official warnings on emission reductions for 2022.