The US dollar index or it is also called as DXY opened lower in early trading on Thursday (5/January). The release of the FOMC meeting minutes in the early hours of the morning presents hawkish Fed policy projections.

That was the same as the post-meeting announcement last month. Market participants, however, doubt it. The greenback also fell again against the euro and yen.

Every parties are still focusing on controlling the inflation. All participants of the FOMC meeting on December 13-14, 2022 agreed that the US central bank needs to reduce the intensity of interest rate hikes. 

At the same time, they emphasized that they would continue to keep interest rates high in order to suppress the rate of inflation. This will become a serious concern for people. 

Flecibiy is Essential and Urgent to Do

FOMC meeting participants stressed the importance of "flexibility" and "optional" in policy making. That was as interest rates may need to be raised even higher if the rate of inflation remains high. 

They also hope that the slowdown in interest rate hikes will not be perceived as a dovish stance by market participants. The participants of the FOMC meeting said something. 

They reaffirmed their strong commitment to return inflation to the Committee's (FOMC) target of 2 percent. It was as said by the minutes released. 

All participants of the FOMC meeting on December 13-14, 2022 agreed that the US central bank needs to reduce the intensity of interest rate hikes. It is based on a worry about inflation. 

Market Does Not Care 

None of the participants see it as feasible to start reducing the Federal interest rate target by 2023," concluded the minutes. In conclusion: The Fed is likely to raise interest rates by 25 basis points or maybe higher. 

That could happen in its next meeting on January 31-February 1. Meanwhile, the Fed has blatantly denied market speculation about the prospect of a rate cut in 2023.  

Their interest rate market is currently in the range of 4.25%-4.50%. Dot Plot projections from the December 2022 FOMC meeting suggest the possibility of interest rates rising to a peak of 5.1% in 2023.

After that, this organization may holding on to those levels for some time. The FOMC minutes present the same thing, complemented by a variety of supporting arguments. 

Many Market Participants Believe in the Fed

However, market participants and some economists still consider the Fed's projections too optimistic. They believe that Federal Reserve will slam the steering wheel in the next few months 

It is especially after future data revealed a deteriorating U.S. economic situation. The analysts view remains that rapidly declining inflation, combined with a sharp decline in employment growth.

Those will shift the United States economy landscape dramatically in the first half of the year. It was said by Paul Ashworth as a Chief North America Economist at Capital Economics.

After the last tightening of 50 (basis points) in the first quarter brought the Fed's interest rate to a peak near 5%, people really expect that the Fed to cut rates before the end of this year.

John Kicklighter of DailyFX also thinks market participants still think the Fed will be dovish this year. He pointed to data on 2Y US Treasury bond yields.

Peak of the Benchmarks Interest Rate will be 5.1%

Based on that data is which only rose slightly, while Fed Funds Futures for February and June signaled that market expectations for interest rates had not changed at all. 

Looking at the Economic Projections Summary (SEP) released alongside last week's policy decision, the Fed projects the benchmark interest rate (to peak) 5.1 percent.

This may come with 17 out of 19 votes forecasting the key interest rate to be above 5.0 percent by the end of the year (2023). However, from Fed Funds Futures, we can see that the market continues to project a view that is not as high as the official projections. This was sated by Kicklighter too.