Shafaq News / The dollar weakened and the yen rebounded from near multi-decade lows on Wednesday after the Federal Reserve held interest rates steady as expected and policymakers still projected three US rate cuts this year even as inflation remains elevated. The Fed's updated quarterly economic projections showed the personal consumption expenditures price index excluding food and energy rising at a 2.6% rate by year-end, compared to 2.4% in the projections the US central bank issued in December. The new policy view also raised the outlook for the US economy. Policymakers now see growth at 2.1% this year compared to 1.4% projected in December, while the unemployment rate is seen ending 2024 at 4%, versus 4.1% anticipated late last year. Fed Chair Jerome Powell said that even with unexpected strength in recent consumer price data, his outlook is that inflation is moving down gradually on a somewhat bumpy road. "Jay Powell is trying to tell everyone that nothing has changed in the short term, that he's still confident that inflation is going to proceed. That's his main message during the press conference," said Thierry Wizman, Macquarie’s global FX and interest rates strategist in New York. The dollar index, a measure of the US currency against six major trading partners, eased 0.46%. The yen reversed an earlier decline as the US currency fell 0.17% to 151.10 yen. Wizman said that the message that came out of the Fed's summary of economic projections is one of a stronger US economy, both in the short and the long term. "There aren't too many ways you can reconcile that unless what you're saying is that the reason that inflation is going to continue to come down is because we're going to see positive productivity trends, positive supply shocks." Earlier the yen had slumped to 151.82, a fresh four-month low against the dollar just hours before the Fed concluded a two-day policy meeting that came after the Bank of Japan (BOJ) on Tuesday raised interest rates for the first time in 17 years. Analysts said the yield differential between US Treasuries and Japanese government bonds remained wide and would keep pressure on the yen as it trades near a multi-decade low of 151.94 to the dollar hit in October 2022. But the major central banks are largely moving in lockstep as they plan to cut interest rates to spur growth as economies slow and inflation keeps decelerating. "Nobody's expecting the BOJ to embark on a prolonged hiking cycle," said Bipan Rai, North America head of FX strategy at CIBC Capital Markets in Toronto. "You're still going to end up in a scenario where the rate differentials between the United States and Japan are going to look fairly wide." The yield on benchmark 10-year Treasury notes fell 2.1 basis points to 4.275%. Low Japanese rates have made the yen the funding currency of choice for carry trades, in which traders typically borrow a low-yielding currency to then sell and invest the proceeds in assets denominated in a higher-yielding one. Recent stronger-than-expected US inflation reports have led traders to further reduce bets on Fed rate cuts this year, with markets now pricing in 81 basis points (bps) of easing by year-end, or almost half expectations at the start of 2024. The euro rose 0.51% to $1.092. European Central Bank President Christine Lagarde said earlier on Wednesday that the ECB will continue to be data-dependent and will not commit to a pre-set number of rate cuts even after it starts easing its monetary policy. Bitcoin was last up 6.4% at $65,860.00. (Reuters)