Federal Reserve expected to hold things in place

The Federal Reserve is heading for a new two-day monetary policy meeting this week, which is set to begin on Tuesday. Market participants will be paying close attention to this event, as they try to understand when the regulator will raise interest rates again.
As for this particular encounter, there are basically no chances of a rate hike. According to Fed funds tracked by CME Group’s FedWatch program, traders are currently pricing in less than a 5 percent odds of a rate move. The remaining part bets on keeping rates steady. At the time, Federal Reserve interest rates are ranging between 0.75 percent and 1.00 percent, where they were left in March after a widely anticipated interest rate adjustment that increased speculation on the monetary normalization process for this year.
The Federal Open Market Committee said as much as three interest rate hikes are due in 2017, if market conditions would support taking such decisions (of course). Investors had initially weighed only two rate hikes (June and December).
FOMC members understand that May doesn’t look good enough for a rate move. Why? Just take a look around you… Only last week, the Commerce Department reported the weakest GDP growth rate for the first quarter in three years (0.7 percent vs 1.2 percent expected).
Employment is also a key indicator for the Fed. While cards have already been played for this month’s meeting, June is now on the watchlist. That’s why investors will be monitoring Friday’s employment reports from the Labor Department. Analysts are expecting a 193,000 jobs build in April, following a downbeat 98,000 jobs added the prior month. The unemployment rate is set to tick up to 4.6 percent, while average hourly earnings are also seen higher.
Also keep in mind the Fed plans to unwind its $4.2 trillion balance sheet, which according to several analysts could delay further monetary adjustments.
Federal Reserve decisions should consider international consequences too. Increasing tension in the Middle East and the Korean peninsula are making it more challenging for the monetary authorities to find right timing as uncertainty covers it all.
Meanwhile, political battle in France is only a week ahead. On Sunday, frenchies will come back to the polling stations to decide whether centrist Emmanuel Macron or far-right Marine Le Pen should take a seat at the Elysee palace for the next four years.