The Federal Reserve held its benchmark federal funds rate at 5.25–5.50% at its January 2024 FOMC meeting, the fourth consecutive hold. Fed Chair Jerome Powell acknowledged progress on inflation but resisted calls for an imminent rate cut.
What the Fed Said
In the post-meeting statement, the FOMC removed language describing inflation as "elevated" — a signal that the tightening cycle is over. However, Powell was explicit in the press conference: the committee wants "greater confidence" in the disinflation path before beginning to cut rates. Markets had been pricing a March 2024 cut at over 70% probability; that probability fell sharply after the statement.
Core PCE — the Fed's preferred inflation gauge — came in at 2.9% YoY in December 2023, down from a peak of 5.6% in early 2022. Progress is clear, but the final mile toward the 2% target is proving stickier than anticipated.
Market Reaction
The US Dollar strengthened across the board in the 30 minutes after the Fed statement, with EUR/USD falling from 1.0882 to 1.0820 before recovering to close at 1.0845. USD/JPY spiked to 148.60, its highest level since November. Gold fell $22 to $2,016/oz.
Equity markets initially dipped on the hawkish tone before recovering to close near flat. The 10-year Treasury yield rose 8bps to 4.03%.
What This Means for Forex Traders
The dollar's near-term trajectory depends heavily on incoming inflation data. NFP (Non-Farm Payrolls) on February 2 will be watched closely — a strong reading would further push back rate cut expectations and support USD. Conversely, a weak reading or another decline in CPI could revive March cut expectations and pressure the dollar lower.