According to the Fed, the risks to achieving its employment and inflation targets are roughly balanced. The central bank noted that the economic outlook remained uncertain and the Fed focused on risks to both sides of its dual mandate.
In particular, the Fed will continue to reduce its holdings of Treasury bonds, Treasuries, and mortgage-backed securities. Such sales put some pressure on the debt market and make the Fed’s policy less accommodative.
Treasury yields moved away from session lows as traders reacted to the Fed’s rate decision. The interest rate on government bonds with a term of 2 years reached a level around 4.23%, while the interest rate on government bonds with a term of 10 years exceeded 4.35%.
The US Dollar Index climbed back above the 104.50 level after the announcement of the Fed’s decision. Traders should note that Powell’s press conference is starting soon, and the US dollar will be sensitive to the Fed Chair’s comments.
Gold retreated after failing to rise above the $2700 level as traders focused on the recovery of the US dollar.
SP500 settled around 5975 as traders remained bullish. In the short term, Trump’s victory is a bigger catalyst compared to the Fed’s policy outlook, although Powell’s comments could have a material impact on current SP500 dynamics.