The Federal Reserve has announced that progress in bringing inflation down to its 2% target has been slow, indicating that any interest rate cuts may not occur until later this year at the earliest. Previously, investors had anticipated approximately six quarter-of-a-percentage-point cuts in 2024, but they have since adjusted their expectations.
In response to the announcement, the yen experienced a substantial rebound, leading to speculation about whether authorities had intervened to support the currency for the first time since 2022. Prior to this announcement, the yen had fallen to a 34-year low of 160 to the dollar following the Bank of Japan’s decision to keep its benchmark interest rate unchanged between zero and 0.1%. Although the central bank raised the rate from minus 0.1% in March, it did not provide any clear indication of when it might raise rates again. Moreover, there was no plan presented for significantly reducing bond-buying activities.
