The Federal Reserve has officially announced that progress in bringing inflation down to its 2% target has been lacking, suggesting that any interest rate cuts will likely not happen until later this year at the earliest. Previously, investors had been expecting around six quarter-of-a-percentage-point cuts in 2024, but have since reduced their expectations.
In response to the announcement, the yen saw a significant rebound, leading to speculation that authorities may have intervened to support the currency for the first time since 2022. The yen had dropped to a 34-year low of 160 to the dollar following the Bank of Japan’s decision to keep its benchmark interest rate unchanged between zero and 0.1%. The central bank had raised the rate from minus 0.1% in March, but did not provide any clear indication of when it might raise rates again. Additionally, there was no plan presented to significantly reduce its bond-buying activities.
