Dollar slides after Fed says rate hikes will be gradual

The dollar dropped sharply Wednesday after Federal Reserve policy makers hinted that interest-rate increases will be slower than investors had expected—and that they’re not yet “reasonably confident” that inflation is rising toward their target level.

The ICE U.S. Dollar Index DXY, -0.20% a measure of the dollar’s strength against a basket of six currencies, was down 0.74% to 95.8810.

In its latest monetary policy statement, the committee of Fed policy makers said it even after employment and inflation have returned to “near mandate-consistent levels,” economic conditions could justify keeping its benchmark Fed-funds rate below levels that central bankers would consider”normal.”

According to the dot plot, the central bank’s median near-term interest-rate outlook was essentially unchanged at 0.625%, but its median forecasts for year-end 2016 and 2017 shifted down by 0.25% to 1.625% and 2.875%.

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