Fed interest rate decision
US Federal Reserve sets the United States interest rates.
The basics
The US Federal Reserve decides the interest rate that sets the cost of borrowing across the United States. It raises rates to cool inflation and cuts them to support growth and jobs.
The decision comes with a statement explaining it, and often a press conference. Markets read both for hints about the next moves, which can matter more than the decision itself.
How to read the result
- Above the forecast
- A higher rate than expected, or a firmer message about inflation, often lifts the USD and can weigh on US shares and gold.
- Below the forecast
- A lower rate than expected, or a softer message, often weakens the USD and can support US shares and gold.
Going deeper
Most decisions are fully priced in by the day: the forecast is rarely wrong about the rate itself. The surprise is usually in the statement, the vote split or the projections, which show how many cuts or rises policymakers expect.
Four times a year the Fed publishes its “dot plot”: each member’s view of where rates will be at the end of each year. A shift in the median dot can move markets more than the decision.
Watch EUR/USD and USD/JPY for the currency's reaction, and government bond yields: a decision that moves expectations for later meetings moves two-year yields first.
FAQs
- Why can the price move the “wrong” way?
- Prices already reflect the forecast, so markets react to the surprise, not the number itself. Other parts of the same release, revisions to earlier months or other news in the same hour can outweigh the headline figure, and a first move often reverses within the hour.
- What does “priced in” mean?
- Traders have already bought or sold on what they expect, so when the expected decision arrives, there is little left to react to. Only the part nobody expected moves prices.
- Should I close my trade before the release?
- That is your decision; this page does not give advice. What is certain is that prices can jump in seconds around big releases, spreads widen, and a stop loss can close at a worse price than the one you set. Many traders check their position size and stop before the release.