Fed Chairman Jerome Powell lowered his voice, USD cooled down, the world breathed a sigh of relief

However, in his speech on February 7, Mr. Powell gave no indication of when the rate hike cycle would stop. The Fed is looking at a range of different data to gauge inflation.

In addition, Chairman Powell also said that inflation has dropped, but interest rates may still need to increase if economic data does not coordinate with monetary policy. Moreover, reducing inflation is a long process and “everything is in the early stages”.

Good news for world financial markets

In its policy meeting on February 1, the Fed reduced the pace of raising interest rates to 25 basis points, bringing the federal funds rate (FFR) to 4.5%-4.75%/year, the highest level. since October 2007.

In 2022, the Fed raised interest rates 7 times, the most recent being 50 percentage points (December) and 4 times before, 75 percentage points each (May, July, September and November) in the past year. an attempt to contain inflation, which was once (June 2022) peaked in 40 years.

Mr. Powell’s assessment that the Fed is making great strides in controlling inflation is considered a “dove” comment. This means that the Fed is likely to stop tightening monetary policy soon.

The Fed raised interest rates to 4.75%/year on February 1 and may increase to 5%/year at its meeting in March 2023. (Chart: M. Ha)

At the December 2022 meeting, a majority of Fed members forecast a rate hike to a peak of 5.1% in 2023, equivalent to a target range of 5%-5.25%. Meanwhile, the market expects the peak interest rate will be near 4.75%, and thinks that the Fed will start cutting interest rates this year.

Domestically, the USD/VND exchange rate continued to increase. In the morning of February 8, USD bought and sold at Vietcombank was 23,460 VND/USD and 23,800 VND/USD, an increase of 10 VND compared to the end of February 7 session and 80,000 VND compared to 23,280 VND/USD (buy) and 23,620 VND. VND/USD (for sale) on February 3.

However, compared with the peak of 24,888 VND/USD (the selling price at Vietcombank) recorded on October 25, the USD still decreased by nearly 4.4%.

On the morning of February 8, the central exchange rate had the third consecutive increase. With a margin of +/-5% being applied, the ceiling rate reached 24,805 VND/USD. The selling price at the State Bank’s Headquarters was 24,780 VND/USD.

The stable US dollar in the world market may help countries, including Vietnam, easier to make monetary and financial policies in the coming time.