MUFG Research discusses its reaction to yesterday's FOMC policy decision.
"Powell’s rhetoric on inflation yesterday was certainly more explicit than we expected and it clearly paves the way for a more dovish FOMC going forward.
Instead of the current policy stance being consistent with supporting inflation “near” the FOMC’s symmetric 2% objective, the statement now reads policy is consistent with inflation “returning to” the objective...No big deal, right? Well certainly no big deal for now with the view on the economic outlook stable but potentially a much bigger deal if conditions start to weaken for some reason. Then this tweak could in theory pave the way for a sooner monetary policy response with additional monetary easing," MUFG argues.
"If we are correct that has negative consequences for the dollar and partly explains why we see the current strength being temporary and ultimately reversing," MUFG adds.