This is a crucial moment for the Fed. It cannot afford to make any mistakes now. Esther Reichelt, a foreign exchange analyst at Commerzbank, examines how the decision of the Fed could impact the dollar.
There are some warnings from a number of analysts, particularly those pointing out that the Fed is focusing on the disinflationary factors of the recent market turmoil, which may make it more difficult for the Dollar to hold its ground, especially against the Euro, now that the ECB has clearly spoken out in support of further interest rate hikes.
"The Dollar, therefore, should be able to gain ground if the Fed remains focused on inflation risks when setting interest rates, while at the same time trying to calm the markets by highlighting its other options that go beyond interest rates. Today's decision, therefore, remains a balancing act."
There is no pause at the moment in Fed's Banks Preview, so we are going ahead with 25 basis points increase.
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