• FxWirePro: what to watch in Federal Open Market Committee meet ahead?

    Source: FxWire Pro - Commentary / 21 Mar 2018 06:18:06   Eastern Standard Time

    We expect a great deal of debate among FOMC policymakers over the path of the hikes as well as whether to go three or more hikes this year or not. Since the last meeting in December, several policymakers like Loretta Mester openly supported a faster rate hike, while some like Charles Evans scaled back their tone as the core inflation remains below Fed’s 2 percent target. Charles Evans joined Neel Kashkari in opposing the third rate hike for 2017.

    A majority of the Federal Reserve policymakers voted in favor of a hike in December, which shows despite the differences FOMC board remains more or less united.

    FOMC will announce its monetary policy decision at 18:00 GMT.

    The focus will be on the followings –

    • Policy decisionMost of the analysts and economists expect the Fed to increase interest rates by 25 basis points. The market is pricing a 95 percent chance of a rate hike.
    • FED’s monetary policy statement – The market would be looking for a clue to future rate hikes by assessing the tone of the statement.
    • Fed projections - This is likely to be the most vital piece of document. The focus will be on participants’ projections of future rate hikes.
    • Press Conference: Today’s press conference will be the new Fed Governor Jerome Powell’s first press conference as the Fed chief.

    The financial market is pretty convinced that the U.S. Federal Reserve would increase rates for the fifth time since 2015 and for the first time in 2018. The market is currently pricing a hike tomorrow 94.4 percent probability.

    In its January FOMC projection, the Fed forecasted three rate hikes for 2018, after increasing interest rates thrice in 2017. The market is currently pricing the third hike in December with 78 percent probability. If FOMC continues to project three rate hikes for 2018, the probability of the second and the third hike might move up but that wouldn’t be sufficient to push the dollar higher as it has been struggling lately as the focus shifted on policy winding by other major central banks around the world.

    The dollar index is currently trading at 90.16, down 0.23 percent so far today.