If the Fed really believed it could talk the dollar up, or that a small rate hike would do the trick, it would have given it a try. I believe it chose a dovish route because of a greater fear of having their hawkish stance casually disregarded.
Imagine what would happen if the Fed raised rates and the dollar kept falling? It would be like one of those horror movies where someone holds a cross up to a vampire, and the Count tosses it aside with nary a cringe.
The FED is out of options and afraid to act lest it make a bad situation worse. The dollar is falling, inflation is rising and still the FED doesn't act. It has no "magic bullet" left in the arsenal.
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