Traders await the FOMC statement and dot plot, with markets pricing in no rate cuts this year amid revised inflation projections.
The USD/JPY pair stabilized around 160.00 as investors turned attention to the Federal Reserve’s upcoming policy decision. The Fed is expected to leave interest rates unchanged but remove its easing bias, with the Summary of Economic Projections (SEP) likely revising inflation higher and unemployment lower in the near term.
Markets have already priced in no rate cuts for 2024, focusing instead on the dot plot and Fed Chair Warsh’s press conference. A hawkish surprise could emerge if the Fed signals potential rate hikes by year-end, while a dovish shift would involve maintaining a single cut in 2025 or later.
Warsh’s stance against forward guidance may limit clarity from the press conference. Meanwhile, the end of the US-Iran conflict could shift inflation risks from supply to demand, potentially supporting further economic strength and rate hikes.