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FxWirePro: What to watch in FOMC meet ahead?

We expect a great deal of debate among FOMC policymakers over the path of the hike as well as whether to go for another hike this year or not. Since the last meeting in November, several policymakers openly supported a faster rate hike, while some of them scaled back their tone after inflation report was disappointing as well as several other data in September. Fed Chair Janet Yellen, despite maintaining her hawkish rhetoric said that low inflation remains a mystery.

A majority of the Federal Reserve policymakers voted in favor of a hike in June, which shows despite the differences FOMC board remains more or less united.

FOMC will announce its monetary policy decision at 19:00 GMT.

Focus will be on the followings –

  • Policy decisionMost of the analysts and economists expect FED to hike interest rate by 25 basis points to 125-150 bps.
  • FED’s monetary policy statement – The market would be looking for a clue to future rate hikes by assessing the tone of the statement.
  • Economic projection - This will be the most vital piece of document as the FOMC policymakers will be projecting their growth, inflation and interest rate expectations. The market is currently projecting two rate hikes for 2018; one in March and other in September.
  • Press conference - Today’s press conference may not insert much volatility, given the fact this is probably Chair Janet Yellen’s last press conference with new Fed Chair Jerome Powell to appear next time onwards.  

Despite the importance of FOMC for the financial market volatility, today’s meeting is likely to be a quiet one as everyone expects hike. Little or no changes are expected even in the statement. However, Fed may provide updates on its tapering, which has begun in October.

The dollar index, which has been rebounding since September after its worst H1 performance in several decades unlikely to take much notice of the meeting. The index is currently trading at 94, down 0.06 percent so far today.

 

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