The dollar index remained steady around 104.5 on Friday as investors weighed the Federal Reserve’s latest interest rate decision.
Dollar muted after the US rates cut
The Fed cut the federal funds rate by 25 basis points, as expected, with Chair Jerome Powell emphasizing that the central bank is not on a preset course. He reiterated that decisions would be made on a meeting-by-meeting basis and that the outcome of the election would not immediately affect policy. Market expectations still point to another quarter-point cut in December, although any unexpected increases in inflation or strong labor market data could shift this outlook. Meanwhile, investors scaled back their expectations for rate cuts in 2025, amid concerns about the potential return of Donald Trump to the White House.
Market reaction to tariff fears
Markets are worried that his proposed tariff hikes could stoke inflation, potentially limiting the Fed's ability to continue easing. The dollar is on track to finish the week with modest gains, as traders took profits following the post-election rally.
