Tuesday, 19 September 2017

Fed’s September Meeting Is Up: What To Expect From It?

Posted by Anonymous at 11:50 Labels:

The Federal Reserve is kicking off its September monetary policy meeting on Tuesday and traders are getting anxious about the taste of Chairwoman Janet Yellen’s speech afterwards.

That is right. No worries are surrounding the Federal Open Market Committee interest rate decision this time, as latest economic reports were not as cheerful as initially expected, building a stronger case for the US regulator to pause its current monetary policy normalization plan.

But of course, not even the best analysts can determine whether policymakers will or not take that path. And in search of a good answer in that matter, market participants will focus on Yellen’s press conference on Wednesday scheduled as of 18:30 GMT.

The idea is to have a better understanding at the central bank’s stance on two key matters: the future of short term interest rates and the massive balance sheet.

And no. The fact that the Federal Reserve said there could be as much as three rate hikes in 2017, doesn’t really mean they should all be executed. Because to so, inflation growth and labor market conditions are supposed to evolve in certain way.

The likelihood of a rate move by December fell to almost 30 percent only two weeks ago as the latest employment report missed analysts’ expectations, suggesting a larger number of unemployed people is expected in the near future.

However, consumer inflation provided some extra support to those hoping for a hike. The US Commerce Department said consumer prices rose by 0.4 percent in August, above a forecasted build of a 0.3 percent. The index also showed a 1.7 percent growth rate in yearly basis, compared to an initially estimated 1.6 percent increase.

In this opportunity, the FOMC is expected to announce the beginning of its plan to unwind Fed’s $4.5 trillion balance sheet. The goal is to reverse the so-called monetary stimulus applied to counteract the severe effects of the 2008 financial crisis and promote recovery afterwards.

Traders should also keep an eye on Fed’s dot plot chart, where every single member of the FOMC is represented with a dot, showing what’s his or her precise stance on policy changes.

You can access the latest dot chart here:

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