The dollar index (DXY00) on Wednesday rose by +0.13%, adding to Tuesday’s gain of +0.45%. The dollar saw support from a fresh US tariff threat and from the hawkish FOMC minutes. However, the dollar was undercut by the -2 bp decline in the 10-year T-note yield.
The minutes from the Jan 28-29 FOMC meeting, released Wednesday afternoon, were hawkish since the minutes indicated that the FOMC has paused its rate-cut regime until inflation improves. The minutes said, “Participants indicated that, provided that the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate.” The minutes also said, “many participants noted that the committee could hold the policy rate at a restrictive level if the economy remained strong and inflation remained elevated.” The FOMC at the Jan 28-29 meeting left its federal funds target range unchanged at 4.25-4.50%, standing pat after cutting the funds rate by a total of 100 bp in second half of 2024. The market is currently discounting a total rate cut of -37 bp by the end of 2025.
