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“With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the committee expects that inflation will remain subdued for some time.”
“The U.S. Federal Reserve is widely expected to hold borrowing costs at the record-low in September and is anticipated to maintain its $1.75T asset purchase program to encourage a sustainable recovery, and long-term expectations for higher interest rates may drive demands for the dollar as market participants speculate the central bank to tighten policy in 2010.”
Investors are keenly awaiting clues on when the Fed might announce its plans for an “exit” from economic stimulus.
“We are still at the stage where discussions over the exit should not be confused as making preparations for the exit,” said Divyang Shah, of IFR Markets.
“The rally on risk assets should continue once financial markets are assured that policymakers are not going to prematurely kill off the recovery in economic and financial sentiment,” he added.
In line with a lessening of risk appetite, some of the most severe losses were for those currencies whose economies are most exposed to commodity prices.
