Long story short, it did what the market wanted. It didn't lower interest rates, but indicated that it expects it will have to at least twice this year.
Overall, it kept the market happy. It kept investors believing that the central bank "put" is firmly in place.
But the pressure is still on Fed boss Jerome Powell. Donald Trump is turning up the heat by directing his complaints away from the US central bank and onto others.
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Currency wars now mean war
Your currency gets weaker, so your products get cheaper relative to those of other countries, and so you benefit at the expense of other nations around the world. It was viewed as a modern-day version of tariffs a repeat of the protectionist spiral we saw after the Great Depression.
However, by and large, the currency "wars" didn't really get nasty. In reality, it ended up being more like a game of "pass the hot potato". There was a sense of coordination and cooperation among the world's central banks.
A good example is when Japan pretty much explicitly made a weaker yen part of its economic recovery plan just after Shinzo Abe was elected in 2012.
On the one hand, it's not really the done thing. On the other hand, Japan did have an extraordinarily strong currency at the time, and it was also viewed as a good thing to have the world's third-largest economy actually contributing to global growth if possible. So everyone let it slide.
Or take the eurozone crisis. Everybody knew that European Central Bank (ECB) boss Mario Draghi had only one policy lever open to him that the Germans couldn't block out of hand. That was to talk the euro down aggressively, offering a morsel of relief to the likes of Italy and Greece until he had managed to win the "hard euro" contingent round.
In short, there was an implicit tolerance of the policy. Everyone agreed to pretend that it wasn't happening, and in return, no single country took the mickey too badly.
As you may have noticed however, we're no longer in the mood for co-operation and co-ordination. And the mood from the US is that any act by a foreign power to make itself more competitive is an act of trade aggression against the US.
Whatever else you want to say about Donald Trump, he understands that a weaker US dollar is good for the stockmarket, and a stronger one is bad for it. He also understands that a rising stockmarket is good for his electoral chances.
That's why he went off on one on Twitter earlier this week when Draghi made it very clear at an ECB shindig in Portugal that, in effect, he's ready to keep doing "whatever it takes" right up until his retirement date later this year. That sent markets higher.
However, Trump's response on Twitter was this: "Mario Draghi just announced more stimulus could come, which immediately dropped the euro against the dollar, making it unfairly easy for them to compete against the USA. They have been getting away with this for years, along with China and others."
So there you go. No more "nudge and a wink" currency wars mean war.
I suspect Powell will give Trump what he wants
He now seems to have decided that if Powell won't give him what he wants, then maybe threatening the other competitors in the race to the bottom will work instead.
Arguably the path of least resistance here is for Powell to accept that weakening the US dollar is now his priority. Otherwise, Trump will go ahead and start talking about imposing tariffs on the likes of Germany and the rest.
And despite Draghi's best efforts, I do wonder how much more he can do. Who will take over from him later this year? Will they be as good at bluffing and playing a tricky hand as Draghi has been? Particularly as the political backdrop they are inheriting is even tougher than the one he was working with?
When in doubt, I like to ask: "What is the biggest sucker punch the market could throw in the faces of investors right now?" There isn't always an obvious answer to that question, because the market is not always positioned at an extreme. There isn't always an obvious contrarian trade at the "big picture" level of the market.
However, right now, there is no doubt in my mind about the answer to that question. The one thing that would really is: "higher-than-expected inflation".
The first step towards that is a much weaker dollar. Until the dollar turns that corner, I can see why the market is still investing so heavily in the deflation scare. But when the psychology turns, it's going to hurt a lot of investors.
We'll be tackling this topic along with many others at the MoneyWeek Wealth Summit in November this year. If you haven't already signed up to be the first to know when the tickets go on sale, get your name down here.
John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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