Between 2004 and 2007, the Federal Reserve gradually raised interest rates and implemented monetary tightening policies to control the level of inflation. Just after the subprime mortgage crisis broke out in 2007, the Federal Reserve began to implement monetary easing policies to stimulate economic recovery, cutting interest rates drastically from 5.25% to 0.25%. The current US benchmark interest rate is still in the 0-0.25% range.

The Federal Reserve has implemented a monetary easing policy, which can directly increase the supply of currency to the foreign exchange market or reduce the benchmark interest rate. Once the Fed's injection of funds into the market exceeds the needs of the foreign exchange market, it will cause the depreciation of the U.S. dollar and rise in prices. Similarly, the Fed cuts the benchmark interest rate to reduce the borrowing cost of the market and depreciates the U.S. dollar. In this way, the Fed directly intervenes in the currency of the U.S. dollar.

Just after the interest rate decision is announced, the Fed will issue a statement on monetary policy. According to the statement, foreign exchange investors can understand the Fed's views on the prospects of the U.S. economy and further judge the Fed's future policy trends. If the Fed’s statement tends to be moderate, it will stimulate the foreign exchange market’s expectations of the Fed’s further easing policy and suppress the U.S. dollar; on the contrary, if the Fed’s statement is too strong, it will inhibit the foreign exchange market’s expectations of the Fed’s further easing policy. Support the rise of the dollar, so the Fed’s statement and interest rate decision are as important to the foreign exchange market.

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