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Fed Meeting Preview

Tue, Sep 18 2007, 07:07 GMT
by Marina Schiaffino

FXstreet.com  |  View company's profile

On Tuesday night at 20:15 CET the Federal Open Market Committee (FOMC) will announce its policy rate decision. This time around, there is an unusually high degree of uncertainty over the outcome of the meeting. We expect the FOMC to lower the Fed funds rate by 25bp to 5.00% and the discount rate by 50bp to 5.25%. Moreover the FOMC will signal a cautious bias towards further easing, focusing on the downside risks to growth arising from the turmoil in financial markets. [Read full report]

Dealers are mixed ahead of the decision, and it is not clear yet what will happen even if such a rate cut is confirmed. The majority of analysts see bearish implications for the USD, while others consider that the move has already been discounted, and see little or no damage to the USD.

Check the effect that the result of the meeting will have over the pairs in our Rates and Charts Section or compare the movements of the different banks in our World Interest Rates Table.

• Board of Governors of the Federal Reserve System
• View the past interest rates data on our Economic Time series
• Special Webinar: Live Coverage of FOMC US Interest Rate Announcement with Jerry Furst

In-Depth Analysis

• · Fed Open Market Committee, September 18th by BBVA Group
• · FOMC: Preview of policy meeting by Danske Bank A/S
• · Daily Market Briefing - How Will the Currency Market React to the Fed Rate Decision? by FXCM
• · Daily Market Overview - Now the FED by Trader College
• · US economic indicators - FOMC is likely to lower the fed funds rate for the first time since June 2003 by BHF-Bank
• · Daily Trading Strategy - What to expect from the FED? by MVDForex
• · Daily Fx Strategy - Plunging Pound Requires 50-bp Fed Cut by CMC Markets NY
• · Commodities Morning Briefing - Focus squarely on the Fed by Jyske Bank
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Related News

• THE FED: 25 Or 50? -- Bernanke's Fed Faces A Key Test (Dow Jones)
• All eyes on Fed this week on Wall Street (Thomson Financial New)
• THE FED: An Ounce Of Prevention Expected From Fed Policymakers (Dow Jones)

Analysts' comments

• Nick Raich, analyst at financial group National City:
  "The decision to cut interest rates by 25 or 50 basis points will not be nearly as important as the Fed's language. We believe market bulls will need a Fed that will show it is willing to do whatever it takes to prevent the economy from slipping into a recession." - AFP
  
• Brian Wesbury, chief economist at First Trust Advisors LP:
  "We still hold out hope the Fed will do the right thing, which is not cut rates at all. Cutting rates, when they are already too low, will 'lock in' inflation, force more rate hikes later, and puts the Fed's credibility as an inflation fighter at risk." - AFP
• Joseph LaVorgna, economist at Deutsche Bank:
  "We strongly believe that if the Fed only cuts rates by 25 basis points even with a strongly worded FOMC statement to commit to more easing if need be, there could be a significant disappointment trade in the financial markets, especially in stocks. If policymakers move too slowly now, they run the risk that more considerable damage will be inflicted on the financial markets and the real economy, and resultantly they will have to cut rates more aggressively in the long run." - AFP

Published on  Tue, Sep 18 2007, 12:13 GMT

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