The Chairman of the Federal Reserve (Fed), Jerome Powell continues to surprise the market with his latest increasingly hawkish statement.
The head of the US central bank warned that officials may raise interest rates higher and faster than expected to stabilize prices.
The move to continue raising rates is indeed expected by investors, but the extent to which the central bank will act is ultimately answered following Powell's statement.
He also said that core inflation did not come down as quickly as expected, referring to the consumer price index (CPI) data released recently.
In addition to that, since the US economic data is still showing strength especially the employment data, the central bank sees that they need to continue tightening.
In addition, Powell said the Fed's decision will be adjusted on a meeting-by-meeting basis based on the latest published data.
This indirectly returns investors' expectations that the central bank will implement a 50 basis point hike at the next meeting (March 23) and the final rate is predicted to peak at 6.00% (currently 4.50%-4.75%).
Following that, the US dollar bounced higher against most major currencies, which saw the dollar index rise to a 3-month high of 105.65.
Other major currencies fell sharply, with the euro falling to a 1-month low, while the pound was the weakest in 4 months against the US dollar.
On the other hand, the Aussie dollar slipped further to the weakest level in 4 months, in addition to being affected by the decision of the Reserve Bank of Australia (RBA) which raised rates by 25 basis points and offered less hawkish statements.
New Zealand and Canadian dollars also fell to 4-month lows, with loonie investors now turning their attention to the outcome of the Bank of Canada (BOC) meeting in New York.
The yen fell further to its weakest level in 3 months as markets looked ahead to the Bank of Japan's (BOJ) policy meeting on Friday.
