FOMC rate decision

The FOMC Rate Decision is a scheduled announcement from the U.S. Federal Reserve that reveals whether interest rates will be raised, lowered, or held steady. It’s made by a group of policymakers called the Federal Open Market Committee (FOMC), who meet roughly every six weeks to assess the health of the U.S. economy.

Higher interest, reduces borrowing, which slows down the economy. However the USD becomes a more attractive investment option, so demand (and thereafter price), for USD increase.

For non-traders, think of interest rates as the cost of borrowing money — when rates go up, loans become more expensive, which can slow spending and inflation. Because the U.S. dollar is tied to these rates, any change (or even hint of a future change) can cause the USD to strengthen or weaken immediately. Traders around the world watch this decision closely, as it often triggers sharp movements in currency markets, especially in the minutes and hours following the release.

How FOMC Rate Hikes Affect the USD

1. Fed raises interest rates to slow inflation.
2. Banks follow suit, increasing lending rates.
3. Loan costs rise for mortgages, business loans, and credit cards.
4. Consumers and businesses borrow less, reducing spending.
5. Economic growth slows, easing inflation pressure.
6. USD assets offer higher returns, attracting foreign investment.
7. Demand for USD increases, causing its value to rise.