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    What to expect from the Fed on 29 July?

    Exactly in a week, on Wednesday, July 29 the Federal Open Market Committee (FOMC) will hold a meeting. Theoretically, the committee may signal its first rate hike, which has been close to zero level for several years. What are the chances for such scenario?

    A week ago, speaking to Congress, Fed Chair Janet Yellen not only reaffirmed the Central Bank’s commitment to the idea of a new tightening cycle later this year, but also made it clear that respective decision can be taken at any meeting of the FOMC, including the one July. A similar idea has been recently expressed by other Federal Reserve representatives, as if refuting common opinion that the Fed won’t take any action until September.

    However, in this case, this theoretical possibility is unlikely to become a reality. Yes, Yellen and her team do not want to have their hands tied and insist on their right to take the fateful decision on any of the meetings. It’s important for the Fed to remind markets of such possibility to keep them up. On the other hand, we cannot ignore “dovish” signals coming from the Fed’s management as well …

    On Friday, July 17, after Yellen spoke to Congress, Federal Reserve Vice Chairman Stanley Fischer during a question-and-answer session in the Chamber of Commerce said: “U.S. inflation is still too weak and the central bank must ensure it moves up gradually to its 2% target.” Then he added: “That’s why we keep interest rates so low – to support investments and promote economic growth.”

    In fact, inflation at 0.2% y/y and core inflation at 1.2% y/y (according to the Fed’s preferred PCE index for the month of May), should be a concern for the Central Bank’s management, as it’s mandate is to maintain moderate price growth. I believe the Fed will keep the rates unchanged for now, hoping to see signs of accelerating inflation by the September meeting.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

    Exactly in a week, on Wednesday, July 29 the Federal Open Market Committee (FOMC) will hold a meeting. Theoretically, the committee may signal its first rate hike, which has been close to zero level for several years. What are the chances for such scenario?

    A week ago, speaking to Congress, Fed Chair Janet Yellen not only reaffirmed the Central Bank’s commitment to the idea of a new tightening cycle later this year, but also made it clear that respective decision can be taken at any meeting of the FOMC, including the one July. A similar idea has been recently expressed by other Federal Reserve representatives, as if refuting common opinion that the Fed won’t take any action until September.

    However, in this case, this theoretical possibility is unlikely to become a reality. Yes, Yellen and her team do not want to have their hands tied and insist on their right to take the fateful decision on any of the meetings. It’s important for the Fed to remind markets of such possibility to keep them up. On the other hand, we cannot ignore “dovish” signals coming from the Fed’s management as well …

    On Friday, July 17, after Yellen spoke to Congress, Federal Reserve Vice Chairman Stanley Fischer during a question-and-answer session in the Chamber of Commerce said: “U.S. inflation is still too weak and the central bank must ensure it moves up gradually to its 2% target.” Then he added: “That’s why we keep interest rates so low – to support investments and promote economic growth.”

    In fact, inflation at 0.2% y/y and core inflation at 1.2% y/y (according to the Fed’s preferred PCE index for the month of May), should be a concern for the Central Bank’s management, as it’s mandate is to maintain moderate price growth. I believe the Fed will keep the rates unchanged for now, hoping to see signs of accelerating inflation by the September meeting.

     

    Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!


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