FOMC meeting preview » The Fed is expected to hike rates by 75 bps

FOMC meeting preview » The Fed is expected to hike rates by 75 bps

The stakes couldn’t be higher for this month’s FOMC meeting – see why!

When does the Federal Open Market Committee meet?

The Federal Reserve’s Federal Open Market Committee (FOMC) concludes its 2-day monetary policy meeting at 2:00 p.m. ET, with Fed Chairman Jerome Powell’s press conference beginning 30 minutes later at 2:30 p.m. ET .

The FOMC will answer you

According to the CME’s FedWatch tool, traders put their odds of a 75 basis point interest rate hike at more than 90%, and watch out for the Wall Street Journal’s new “Fed Whisperer,” Nick Timiraos, in this morning’s Fed preview article.

Source: WEC FedWatch

Notably, traders are currently at 4.9% in fed funds in May 2023, and this is what one is most likely to draw the attention of the changer (and by extension, market moves to). ) following this week’s Fed meeting. In other words, traders should focus more on the Fed’s expected destination (peak interest rate), not the course (the exact order and pace of rate hikes) in the months ahead. come.

Opening of the FOMC meeting

The stakes could not be higher for this month’s FOMC meeting. While the decision for a 75 basis point house seems relatively simple, the accompanying statement and press conference subsequently watched for all indicate that the central bank is considering slowing the pace of rate houses in the coming months.

Based on the central bank’s September economic forecast and comments from commentators such as San Francisco Fed President Mary Daly, the Fed is likely to start a debate about slowing the pace of rate hikes in its December meeting. Any hint in Fed Chairman Powell’s monetary policy statement or (most likely) press conference indicates that these talks began to give risk assets an immediate boost and a pullback in the US dollar. That said, with more NFP reports and another CPI print ahead of the next Fed meeting in December, the central bank has avoided its involvement in the advance on a specific voice also in the long run ahead. .

Notably, the jobless rate remains near historic lows, with the most recent reading showing just 3.5% unemployment in September. In other words, the “full employment” half of the Fed’s dual mandate appears to be comfortably fulfilled for now, so we would expect the central bank to have focused on the risks of continued high inflation. (the “price stability” half of its term), especially after the Fed’s preferred Core PCE inflation measure has risen for consecutive months, it is currently at 5.1%, more than double the Target 2% from the central bank and close to the multi-decade highs we saw in the first quarter of this year.

Market Incidents

The sharpest impact of the Fed meeting was felt in the US dollar. After forming a clear and consistent uptrend in the first three quarters of the year, the US dollar index (DXY) to lose some momentum over the past month and now test the support of its 50-day moving average EMA and rising trendline. Any clear index of a pivot versus a 50bps rate hike in December could push the US Dollar index below that key support zone around 109.50, opening the door for a pullback towards 108.00 next, as A “full steam” message around interest rates would reinvigorate the USD uptrend and bring the USD Index back to its highs above 114.00.

FOMC meeting preview » The Fed is expected to hike rates by 75 bps
Source: TradingView, StoneX

By Matt Weller, CFA, CMT, » Official Site fomc stocks

Disclaimer: The information and opinions contained in the report are provided for general information only and do not constitute an offer or a solicitation concerning the sale or sale of foreign exchange contracts or CFDs. Although the information contained herein is from sources believed to be reliable, the author does not warrant its accuracy and is not exhaustive, and assumes no liability for direct, indirect or consequential damages arising from than anyone he trusts such information.

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