Commenting on the Fed’s more hawkish view with two rate increases by end-2023, Jesús Cabra Guisasola, Associate at Validus Risk Management, said: “As most investors anticipated, the Fed left its monetary policy unchanged, with rates near zero and continued buying of bonds at the current $120bn monthly pace. However, all eyes were on the median dot which displays policy makers’ projections of the target interest rate which is now showing more hawkish view with two rate increases by end-2023.

“This announcement was highly anticipated as recent US economy data has been mixed with CPI well above market consensus, but the labour market recovering at a slower pace compared to what most investors were forecasting. Moreover, May retail sales released on Tuesday surprised to the downside with a -1.3% contraction (vs -0.8% expected), signalling a clear shift from goods to services as the economy continues opening and Americans engage on other activities.

“Nevertheless, this data has been supportive for Powell and most of the Fed policy makers to continue with its dovish tone and bond purchases programme until “substantial further progress” has been made. Questions will be around how much the Fed will let prices to continue increasing before considering the economy is overheating and what time frame policy makers will be looking at to achieve the average 2% inflation rate.

“We could expect some downward pressure in the dollar in the coming months as global economic recovery continues, with the Fed committed to be the last central bank to start tapering.”