WASHINGTON (dpa-AFX) - The U.S. dollar turned quite weak against most of its rivals on Wednesday after the Federal Reserve indicated that interest rates are likely to remain at current near-zero levels through 2022.
The dollar index dropped to a low of 95.72 soon after the policy announcement by the Federal Reserve. It regained some ground after that, and after another slip, recovered to 96.10 around late afternoon, but was still down in negative territory, losing about 0.23% from previous close.
Against the Euro, the dollar weakened to $1.1424 post the policy announcement by the Fed, and recovered to $1.1377 subsequently, but was still down from previous close of $1.1338.
Against Pound Sterling, the dollar was weaker at $1.2749 compared with $1.2727 on Tuesday.
The Japanese currency strengthened to 107.13 a dollar, from 107.75 a dollar.
Against the Aussie, the dollar was down at $0.7000, easing from $0.6961. The Canadian Loonie was down marginally at 1.3407 a dollar, while Switzerland's franc was firming up by about 0.75% to 0.9437 a dollar.
The Federal Reserve, as widely expected, held the target range for the federal funds rate at zero to 0.25%. While it expects the U.S. economy to rebound in 2021 following a sharp contraction this year due to the coronavirus pandemic, the central bank has indicated interest rates are likely to remain at current near-zero levels through 2022.
The accompanying statement also reiterated that the Fed expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.
The economic projections provided along with the statement showed most Fed officials expect rates to remain at current levels through 2022, with only a couple predicting an increase in rates.
In his post-meeting press conference, Fed Chair Jerome Powell said the central bank is 'not even thinking about raising rates.' He also told reporters that it 'remains an open question' whether targeting interest rates along the yield curve would usefully complement the Fed's main tools.
Expectations that rates will remain at record lows come as the Fed projects real GDP to nosedive by 6.5% in 2020, as the ongoing public health crisis weighs heavily on economic activity.
However, the Fed's projections call for real GDP to rebound by 5% in 2021 followed by a 3.5% jump in 2022.
The unemployment rate is expected to drop to 9.3% by the end of this year from the current 13.3% before pulling back further to 6.5% in 2021 and 5.5% the next year.
Regarding the Fed's asset purchase program, the central bank said it plans to increase its bond holdings at least at the current pace over the coming months but noted it remains prepared to adjust its plans as appropriate.
The Fed's statement was little changed from April but did acknowledge financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
In April, the Fed had said, 'The disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses.'
In other economic news, a report from the Labor Department said consumer prices saw a modest decrease in the month of May a showing the biggest drop in over a decade in the previous month. The report said the consumer price index edged down by 0.1% in May after slumping by 0.8% in April. Economists had expected consumer prices to come in unchanged.
The dip in consumer prices came amid a continued decrease in energy prices, which tumbled by 1.8% in May after plunging by 10.1% in the previous month. Prices for gasoline and fuel oil showed notable declines.
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