FOMC Interest rate decision (Fed) | News & Analysis

Fed leaves door open to rate cuts, but in no rush to do it

LATEST FED MEASURES TO BATTLE INFLATION

Fed's Powell: Restrictive policy needs further time to work

By Pablo Piovano |

Federal Reserve (Fed) Chairman Jerome Powell participates in a fireside chat about economic trends in North America at the Wilson Center’s Washington Forum in Washington, DC. Powell said that the U.S. economy's performance has been quite robust. He added that recent data indicates a lack of significant progress on inflation this year. Despite ongoing strength, Powell noted that the labour market is transitioning towards a better equilibrium.

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Breaking: FOMC Minutes show concerns over inflation persist

By FXStreet Team |

During the FOMC Minutes, participants expressed general uncertainty about the persistence of elevated inflation and indicated that recent data did not increase their confidence in inflation trending sustainably towards the 2% target. In addition, officials deliberated over whether the greater risk lies in monetary policy remaining overly restrictive for an extended period or in the Fed easing prematurely and failing to achieve the 2% inflation target.

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What's important about Federal Reserve’s monetary policy meeting?

With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks.

In the US, the Board of Governors of the Federal Reserve (FED) meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency.

If rates remain unchanged, attention and also main news and analysis turn to the tone of the FOMC (Federal Open Market Committee) statement, and whether the tone is hawkish, or dovish over future developments of inflation.

What is the Fed?

The Federal Reserve System (Fed) is the central banking system of the United States and it has two main targets or reasons to be: one is to keep unemployment rate to their lowest possible levels and the other one, to keep inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

Fed official website, on Twitter and Facebook

How to trade the event?

  • Do not rely on the Fed to determine the direction of the dollar in the coming months.
  • The dollar tends to follow its predominant trend when the Fed starts to hike rates.
  • There is no direct link between the Fed hiking rates and the usd falling. When a weak usd has coincided with a Fed hiking cycle, it has been falling for some time.
  • Due to this, we may see a muted reaction to a potential Fed rate hike.

WHO IS FOMC'S CHAIRMAN?

Jerome Powell

Jerome Powell Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.

Jerome Powell Fed's Profile  and  Wikipedia

The World Interest Rates Table

The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.