What to watch in FOMC meet ahead?

We expect a great deal of debate among FOMC policymakers over the path of a hike as well as whether to go for a hike at this meeting or not. Since the last meeting in September, several policymakers openly called for a faster rate hike, while some of them scaled back their tone after employment report was disappointing as well as several other data in September.

A majority of the Federal Reserve policymakers voted in favor of a hike in the discount rate, which should provide a signal that the Fed is closer to a rate hike. However, in September only 3 called for a hike at the FOMC meeting. Fed is unlikely to go for a hike with just days to the election.

Focus will be on the followings –

• Policy decision –Most of the analysts and economists expect FED to hold interest rates steady at the current level of 0.25-0.5%. The market is pricing greater chance of no hike today.
   
• How divided is the board – In September, only three of the decision makers voted in favor of a hike. So the market will maintain a close focus on how divided the Fed is in terms of voting. We expect that number to increase but not enough to warrant a hike.
   
• FED’s monetary policy statement – With no press conference scheduled, the focus would on the statement, looking for a hint of a rate hike. Fed is unlikely to add election outcome as a risk to the economy.

The dollar index, which has been taking a heat as Republican candidate Donald Trump closes in on Hillary Clinton, may dive further if fed holds rate. The dollar index is currently trading at 97.43 down 0.34 percent so far today.