FxWirePro: What to watch in FOMC meet ahead?

We expect a great deal of debate among FOMC policymakers over the path of the hikes as well as whether to go with three more hikes this year or not. Since the last meeting in December, several policymakers like Loretta Mester openly supported a faster rate hike, while some like Charles Evans scaled back their tone as the core inflation remains below Fed’s 2 percent target. 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 December, 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 decision –Most of the analysts and economists expect the Fed to keep policy rates unchanged at 125-150 basis points.

• FED’s monetary policy statement – The market would be looking for a clue to future rate hikes by assessing the tone of the statement.

• At this meeting, there will be no economic projection and there will be no press conference afterward, which is likely to make the market reaction relatively muted.

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

The dollar index, which has not been performing well this year, might slide further post-FOMC. The dollar index is currently trading at 88.89, down 3.7 percent so far this year.