13.12.202320:39:00UTC+00Dollar Slips After Fed Policy Announcement

The U.S. dollar lost ground against its major counterparts on Wednesday after the Federal Reserve left rates unchanged and the accompanying statement signaled interest rate cuts next year.

In support of its dual goals of maximum employment and inflation at the rate of 2% over the longer run, the Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.5%.

The accompanying statement said the decision came as economic growth has slowed from its strong pace in the third quarter, while inflation has eased over the past year.

With regard to outlook for rates, the statement notably included the word "any" with regard to whether "any additional policy firming" may be appropriate.

The projections provided by the Fed also suggest the central bank will begin cutting rates next year, with the median forecast indicating rates will be lowered to 4.6% by the end of 2024.

The median forecast points to rates in a range of 4.5 to 4.75%, hinting the Fed plans to cut rates by 25 basis points three times next year.

The Labor Department released a report showing producer prices in the U.S. unexpectedly came in flat during the month of November.

The report said the producer price index for final demand was unchanged in November after falling by a revised 0.4% in October. Economists had expected producer prices to inch up by 0.1% compared to the 0.5% drop originally reported for the previous month.

The Labor Department also said the annual rate of producer price growth slowed to 0.9% in November from 1.2% in October. Year-over-year growth was expected to slow to 1%.

The dollar index dropped to 102.78, and despite recovering to 102.92, remained well below the flat line, losing about 0.9%.

Against the Euro, the dollar weakened to 1.0878 from 1.0795. Against Pound Sterling, the dollar was weak at 1.2623 a sterling from 1.2563.

The dollar declined sharply against the Japanese currency, fetching 143.06 yen a unit, from 145.45 yen. Against the Aussie, the dollar weakened to 0.6667 from 0.6559, and against Swiss franc, it dropped to CHF 0.8721.

The dollar dropped against the Loonie as well, easing to C$ 1.3504 as oil prices rebounded from recent losses.