EUR/USD drops by 0.21% on Wednesday as the Federal Reserve (Fed) left interest rates unchanged, with the Board expecting just 25 basis points of easing towards the end of the year, as depicted in the Summary of Economic Projections (SEP).
Dollar firms after Fed keeps rates unchanged and trims easing outlook
The Fed’s monetary policy statement revealed that economic activity continued to expand solidly and acknowledged that the labour market is in a no-firing, no-hiring scenario and that inflation remains “somewhat elevated.” They commented that the economic outlook remains uncertain, and that “implications of developments in the Middle East for the US economy are uncertain.”
Consequently, they decided to keep rates in the 3.50%-3.75% range, on an 11-to-1 vote split, with Fed Governor Stephen Miran opting for a 25-basis-point rate cut.
Summary of Economic Projections
Federal Reserve officials expect the US economy to grow 2.4% in 2026 and 2.3% the following year. The Unemployment Rate is expected to remain steady at 4.4%, while inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, is forecast at 2.7%, up from 2.4% at the December meeting.
Core PCE for the full year is projected at 2.7%, up from 2.5% in the previous SEP report. Regarding monetary policy, Fed officials expect just a quarter-percentage-point rate cut in 2026 and an additional 25 basis points in 2027.
EUR/USD reaction
EUR/USD Daily Chart
EUR/USD was muted following the Fed’s decision but remained above 1.1500 after hitting a daily low of 1.1490 earlier in the European session.
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