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The Federal Reserve and the art of navigating a soft landing ... when economic data sends mixed signals 
The U.S. Federal Reserve is in a neutral mode, as Fed chair Powell has recently signaled the possibility of longer rate pause going ahead. Since December 2015, the U.S. Federal Reserve has hiked rates eight times. It has hiked rates thrice in 2018 in unanimous voting and forecasted two more hikes in 2019.
FOMC will announce its December monetary policy decision today at 18:00 GMT.
The focus will be on the followings –
- Policy decision –Most of the analysts and economists expect the Fed to keep the interest rate unchanged at 225-250 bps.
- FED’s monetary policy statement – Without any rate hike expected, the focus would be on the monetary policy statement, Fed’s choice of wording on economic condition.
- Projection materials: This is the most vital piece of releases and the market is expecting dovish forecasts both in terms of economic projections, as well as the number of rate hikes in 2019. The market is pricing a rate reduction of 25 bps in the forecast for 2019. An absence of such would be bullish for the USD.
- Press Conference: Fed chair Powell is likely to get pressed by the media for rationale behind today’s decision if rates are not hiked and clues to future monetary policy path.
The meeting is expected to be a big mover, as the market is increasingly unsure of Fed’s next moves amid lower oil price and signs of weakness in global GDP growth.
The dollar index is currently trading at 96.48, up 0.07 percent for the day. The dollar is likely to drop significantly should the Fed decides to wait out and reduce hike forecast.
