• The Fed acknowledged no significant progress towards the 2% inflation goal, maintaining a hawkish stance.
• Despite challenges, Powell notes restrictive policies have moderated inflation and that risks to dual goals are more balanced.
• Markets are giving up the hopes of three rate cuts in 2024.

The NZD/USD found some momentum after the widely-anticipated Federal Reserve (Fed) decision which announced yet another hold, leaving rates at the 5.25-5.50% range. Powell’s cautious tone and data dependency were taken as dovish by markets which made investors dump the USD.

In addition, Powell stated that the bank still needs additional evidence to gain confidence to start cutting rates, noting that inflation’s progress stagnated in the last months. He confirmed that in case data continues to come strong, it would be appropriate to hold the restrictive police for some more time. When the data started to align with the bank’s forecast, he pointed out that he would consider cutting rates.

Regarding expectations, markets are giving up hopes of a cut in June and July and are pushing the start of the easing to September or even November