http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/http://www.fxstreet.com/fundamental/http://mediaserver.fxstreet.com/images/fxstreet-provider-logo1-en.gif7http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-11-05.htmlTarget interest rate maintained at 0.0-0.25% Economic slack justifies holding rates low as recovery begins FOMC economic outlook improved but challenges remain The primary take-away from the FOMC’s statement is that it will likely continue to hold the fed funds rate at a low level for a prolonged period of time even as the recovery takes hold. While the statement maintained the language stating that, “economic conditions… are likely to warrant exceptionally low levels of the federal funds rateThu, 05 Nov 2009 07:53:51 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-11-05.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-10-15.htmlStaff revised GDP forecast upward; labor market weak Inflation likely to remain subdued; exit strategies discussed Target rate will remain at 0%-0.25% for an extended period Recent consumer spending and housing market data show initial signs of recovery. Despite the staff’s upward revision of GDP growth, unemployment remains high and employment growth will remain low. “Participants emphasized that the labor market remains weak,” and they expect only “moderate growth in consumer spending.” SomeThu, 15 Oct 2009 08:22:02 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-10-15.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-09-03.html• Economic recovery is expected in 2H09, but challenges remain • Downside risks to inflation persist • Target rate will remain at 0%-0.25% for a prolonged period The FOMC expressed more confidence in its outlook that economic growth would take hold in the second half of 2009, although it believes that risks remain. Furthermore, members agreed that the pace of recovery would pick-up in 2010, but they expressed uncertainty about the strength of the rebound, citing consumer spending and creditThu, 03 Sep 2009 10:35:21 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-09-03.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-08-13.htmlEconomic activity is stabilizing, but risks remain Fed will slow Treasury purchases to the end of October Outlook still warrants low rates for a prolonged period Given current economic conditions, the FOMC will maintain its target interest rate at 0% to 0.25%. In line with recent data, the committee stated that “economic activity is leveling out,” which is a more positive outlook than the previous meeting’s message that contraction was slowing. Nevertheless, ongoing risk could cause economicThu, 13 Aug 2009 07:10:41 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-08-13.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-07-17.htmlEconomic activity has stabilized further, but risks remain Core inflation is expected to remain low Committee will maintain the target rate of 0 to 0.25% The FOMC announced that economic contraction had subsided and downside risks to economic growth had diminished, but threats remain. Participants also judged that financial market developments have been positive, but could be attributed to support from government programs rather than solid fundamentals, and credit markets remain tight amidFri, 17 Jul 2009 09:14:24 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-07-17.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-06-25.htmlPace of economic contraction is slowing No changes to the securities purchase program Rates likely to remain low for a prolonged period of time The FOMC decided to maintain its target interest rate at 0% to 0.25%. In light of data released during the intermeeting period, the FOMC acknowledged that the pace of economic contraction is slowing, citing the recent improvements in the financial markets, further signs of stabilization in household spending and better alignment of inventories withThu, 25 Jun 2009 14:25:13 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-06-25.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-05-21.htmlSigns of stabilization in economic and financial activity Risks of deflation have diminished Interest rates are expected to remain unchanged The FOMC agreed that the near-term economic outlook has improved, but there are still “significant downside risks.” In addition, financial market conditions have strengthened but the system remains vulnerable to shocks and credit markets are still weak. Staff revised up its forecasts for 2H09 and 2010 after revising them down in March in response toThu, 21 May 2009 07:38:20 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-05-21.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-04-30.htmlTarget rates of 0%-0.25% are maintained Signs of stabilization in the economy but activity will remain weak for some time Downside risks to inflation continue The FOMC decided to maintain its target interest rate at 0% to 0.25%. In the intermeeting period, the economy continued to contract “though the pace of contraction appears to be somewhat slower.” Household spending, in particular, has shown signs of stabilization, which is demonstrated by today’s positive PCE results. The overall messageThu, 30 Apr 2009 08:19:27 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-04-30.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-03-19.htmlThe economic outlook worsened Fed significantly increased the size of its balance sheet Similar measures are likely in the near future The FOMC decided to maintain its target interest rate at 0 to 0.25%. During the intermeeting period, economic conditions remained weak as “Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending.” In addition, financial instability has prompted firms to scale back investment, while exports ofThu, 19 Mar 2009 08:50:01 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-03-19.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-02-19.htmlDownside risks to growth intensified  FOMC discussed additional measures to boost recovery We expect interest rates to remain unchanged FOMC viewed credit conditions as extremely tight, “with financial markets fragile and some parts of the banking sector under substantial stress.” Yet, FOMC highlighted signs of recovery in markets receiving relief from the different liquidity facilities. Staff revised downwards its forecast for 1H09, as weaker-thanexpected economic releases more thanThu, 19 Feb 2009 10:36:30 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-02-19.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-01-14.htmlFurther alternative measures are likely to be implemented in the short-run Fed will continue using its “credit easing” strategy and keep interest rates low subjet to economic outcomes Bernanke highlighted a significant degree of uncertainty surrounding the economic outlook. "The global economy will recover, but the timing and strength of the recovery are highly uncertain." There was also an explicit recognition that former steps have not been enough to restore the financial meltdown, openingWed, 14 Jan 2009 09:23:24 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-01-14.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-01-07.htmlFOMC Minutes December 15-16, 2008 The Comittee discussed extensively additional ways to stimulate the economy Fed economic outlook deteriorates further, while downside risks to inflation intensify Participants agreed that economic conditions worsened considerably in the intermeeting period as “the adverse feedback loop between financial conditions and economic performance had intensified”. Members agreed that “the uncertainty surrounding the outlook was considerable and that downside risks toWed, 07 Jan 2009 08:26:20 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2009-01-07.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-12-17.html• The economic outlook worsened and FOMC expect inflation to moderate further • Fed funds are likely to remain low in 2009 and 2010 • Exceptional measures will follow In an unprecedented decision, FOMC lowered its target interest rate to a range between 0 and 0.25% from a previous 1% (it has reached a historical low). The Board of Governors decided to cut the discount rate by 75bp to 0.5%. Rates are likely to remain at these levels in 2009 and very probably also in 2010. In the intermeetingWed, 17 Dec 2008 14:47:13 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-12-17.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-11-20.htmlFOMC Minutes October 28-29th 2008 Fed expects the economy to contract moderately in 2H08 and 1H09 and to overall grow at around zero in 2009 Some participants saw risks to the downside on inflation We expect an additional rate cut on December 16th, 2008 The staff reduced its forecast for economic activity in 2H08, 2009 and 2010. It expected GDP to contract in 4Q08. Moreover, it predicted “that real GDP would continue to contract somewhat in the first half of 2009 and then rise in the secondThu, 20 Nov 2008 10:07:25 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-11-20.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-10-30.htmlFOMC Meeting October 29th Fed appears more concerned on economic growth In contrast, the outlook for inflation has improved FOMC expects that the rate cut along with other measures, will help to alleviate the financial crisis However, members expect a slow recovery FOMC lowered its target for the federal funds rate 50 basis points to 1%. The move was widely expected by market participants. On the economic front, the statement remained pessimistic as it stressed that “the pace of economicThu, 30 Oct 2008 08:48:07 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-10-30.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-10-09.html• FOMC lowered its target interest rate by 50bp to 1.5% • The move is part of a global joint effort to alleviate financial stress around the world • Fed movement was widely expected by market participants • Fed recent communication and today’s action confirm that downside risks to growth have increased dramatically • Further rate cuts cannot be ruled out if conditions worsen Press Release FOMC Policy Action October 8, 2008 The Federal Open Market Committee has decided to lower its target forThu, 09 Oct 2008 07:23:50 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-10-09.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-10-08.html• Downside risks to growth have intensified • Members considered to lower rates if conditions worsen • Thus, we expect further rate cuts According to the Minutes, economic indicators reviewed at the meeting showed further deterioration in labor markets. In addition, consumer spending weakened noticeably and residential investment continued to decline. Core inflation eased somewhat in August. The staff revised down its 2009 GDP growth forecast as “the earlier run-up in oil prices, weakenedWed, 08 Oct 2008 08:00:07 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-10-08.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-08-28.html* Base scenario includes a slowdown throughout 2008 and relatively high (although temporary) inflation rates * Members gave equal weight to growing growth and inflation risks * The minutes explicitly mentioned that the Board expects the next interest rate move to be a rate hike. But did not commit to such move anytime soon The minutes for August’ FOMC meeting reinforced the views we expressed in our last Fed Watch. The Fed has purposely stirred from its July’s message, time when it expressedThu, 28 Aug 2008 07:31:47 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-08-28.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-07-17.html• Members recognized that risks to growth persisted and that risks to inflation had risen • Less consensus on risk assessments. All members saw rising risks, but some viewed the balance of risks tilted towards inflation. • The Board is managing growing uncertainty about the outlook, thus justifying a “wait and see” policy. One day after Bernanke's testimony in Congress, The Fed released the minutes for last month's FOMC meeting. As it was expected after the hawkish statement that accompaniedThu, 17 Jul 2008 08:36:38 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-07-17.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-07-16.html• Fed assistance to Fannie and Freddie is temporary, while Congress decides how to proceed • Bernanke indirectly supported Congress proposal to help households facing foreclosure • Rising uncertainty for both future growth and inflation. FOMC will assess incoming information as it becomes available Bernanke testified before Congress amid growing concerns about the financial condition of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. Bernanke assured Congress that theWed, 16 Jul 2008 08:18:00 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-07-16.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-06-26.html• The Fed maintained its target rate at 2%. But the statement was hawkish in tone, in line with recent speeches of Board members • FOMC is now more concern with risks to inflation than with risks to the growth outlook • While we expect a pause in its next meeting August 5th, the Fed will not hesitate to act if inflationary pressures increase further or if inflation expectations continue to deteriorate Inflationary Risks continue to rise, while growth drags. The Federal Open Market CommitteeThu, 26 Jun 2008 07:29:28 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-06-26.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-06-24.html• Pressures to both growth and inflation persist • Lower marginal benefits of further rate cuts and higher inflation risk point to a prolonged pause • Fed will keep its options open In its next meeting the FOMC will probably maintain rates at 2%. After pursuing aggressive rate cuts for the last 10 months, we expect this to be the first meeting where the FOMC keeps rates constant, thus suggesting a floor in the current interest rate cycle. The expected pause should not be interpreted as the endTue, 24 Jun 2008 08:27:49 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-06-24.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-06-04.htmlBernanke signaled the Fed intention to end interest rates easing. “For now, policy seems well positioned to promote moderate growth and price stability over time. We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate”. Bernanke remains alert, but feels more confident that financial instability is receding. “The resulting reductions in funding pressures, together with the increased confidence created by the assurance thatWed, 04 Jun 2008 08:28:59 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-06-04.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-05-22.html• The minutes showed that expectations for 2008 had deteriorated since the previous meeting. Participants lowered their forecast for GDP growth in 2008 while revising up sharply their outlook for inflation • FOMC members expected a recovery in 2009, but admitted that downside risks to the outlook were significant. Risks to growth were linked to the enduring strains in the credit market, while risks to inflation were mainly associated with changing expectations • As long as their new baseThu, 22 May 2008 07:58:41 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-05-22.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-05-05.htmlThe Fed increased liquidity provisions to financial institutions yet again. This measure -- that comes as response to the markets’ pressing request for funding -- underscores the Fed continuing concern with the vulnerability of the financial system. Today’s measures reinforced all three of the Fed innovative instruments to manage the current turmoil: Term Auction Facilities (TAF), Term Securities Lending Facilities (TSFL) and temporary reciprocal currency arrangements with other central banks:Mon, 05 May 2008 13:43:21 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-05-05.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-05-02.html• The Fed lowered its target rate by 25 basis points to 2%. The statement acknowledged a weakening trend in business spending.  • FOMC appears to be more concern with inflation and inflation expectations • While we do not expect further cuts in their next meeting on June 24th/25th, the Fed left its options open. Growth and Inflationary Risks Are Becoming More Balanced The Federal Open Market Committee announced today a 25 bp cut on its target for the federal funds rate, which now standsFri, 02 May 2008 09:21:14 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-05-02.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-04-25.html• Additional pressures on inflation • Lower marginal benefits of further rate cuts • However, Fed will keep its options open In its next meeting FOMC will probably reduce rates by 25bp. This move would take rates down to 2% confirming a deceleration in monetary easing that has gone from 75 bp cut in January, to 50bp cut in March, to our expected 25 bp cut at the end of April. Two factors justify this strategy: 1. The inflation theme has reappeared in recent speeches this month. Governor WarshFri, 25 Apr 2008 07:53:56 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-04-25.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-04-09.html• Fed more worried on downside risks to growth • Strains in financial markets continued to pose significant uncertainty to the economic outlook • We expect further monetary policy easing FOMC more pessimistic on economic activity FOMC minutes continued to reflect a more pessimistic view on economic activity and increased downside risks to growth. According to the Fed: • The contraction in homebuilding intensified • Consumer spending appeared to be weakening • Industrial production fell inWed, 09 Apr 2008 07:22:52 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-04-09.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-03-19.html• The Fed lowered its target rate by 75 basis points to 2.25%. The statement continued to stress the downside risks to growth, acknowledging higher uncertainty on the inflation side • The outlook remains fraught with danger, recognizing the deterioration of credit conditions and the overall economy since their last scheduled meeting in January 30th • FOMC was more pessimistic regarding inflation. It recognized that inflation expectations have risen, adding more uncertainty to the inflationWed, 19 Mar 2008 11:14:30 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-03-19.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-02-15.html• Bernanke indicated that downside risks to growth have increased and conditions in the labor market have softened • Bernanke’s baseline outlook involves a period of sluggish growth in the first half of 2008 • The speech is consistent with our current expectations of a 0-25 bp cut in the next FOMC meeting The Fed Chairman’s speech did not change drastically from his previous intervention in front of the House of Representatives budget committee last month. The market was expecting a moreFri, 15 Feb 2008 09:20:40 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-02-15.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-01-31.html· In a decision anticipated by the market, the FOMC cut the fed funds rate by 50 basis points to 3.0 percent · FOMC members stressed that the uncertainty surrounding the outlook remains, and inflation expecattations seem to be well anchored · Overall, we believe that future rate cuts depend heavily on the pace of economic activity There are considerable downside risks to economic growth and there has been no improvement since the last FOMC scheduled meeting in December. In the press releaseThu, 31 Jan 2008 08:27:54 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-01-31.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-01-28.html· The Fed is willing to act decisively to maintain orderly functioning in financial markets, and thus lower the risk of a sharper slowdown in economic activity · As a consequence of this strategy, FOMC will continue lowering the fed fund rates in the coming months The FOMC lowered the fed funds rate by 75 bp last Tuesday, in a “decisive” action that could have been in the cards during the meeting ending on January 30, as the economic outlook deteriorated in previous months and “appreciableMon, 28 Jan 2008 08:13:19 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-01-28.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-01-23.html· The action taken by the FOMC is the more aggressive rate cut, in a single move, since October 1984 · Today’s rate cut is a response to the ongoing deterioration on financial market conditions and credit tightening for some businesses and households · Risks to the short-term economic outlook are clearly tilted towards the downside · The Fed’s action was approved with eight votes in favor and one against The Fed’s emergency interest-rate cut, one week before their scheduled meeting, was aimedWed, 23 Jan 2008 08:30:57 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-01-23.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-01-18.htmlBen S. Bernanke testimony before the committee on the Budget, U.S. House of Representatives · Bernanke indicated that the baseline scenario for economic activity has worsened and the downside risks to growth have increased · The speech is consistent with our current expectations of a 25-50 bp cut in the next FOMC meeting · The Fed supports the rapid implementation of temporary measures to stabilize economic activity, which includes a fiscal stimulus package Mr. Bernanke indicated that the FedFri, 18 Jan 2008 08:45:24 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2008-01-18.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-12-07.html· Risks to economic growth have increased substantially · The probability of more rate cuts is higher · We expect a 25bp rate cut in the next FOMC meeting The FOMC decided on October 31 to cut the fed fund rate as well as the discount rate by 25 bp. Following that decision, members seemed to have a neutral stance with respect to the economic outlook. As they expressed in the rate decision, “the upside risks to inflation roughly balance the downside risks to growth.” This assessment was to someFri, 07 Dec 2007 09:24:15 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-12-07.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-10-26.htmlIn his speech at the HEC-Montreal International Transmission and Macroeconomic Policies Conference, Fed Governor Frederic Mishkin discussed the advantages of using monetary policy rules that focus on core inflation rather than headline inflation, mainly because of the inherent volatility of this indicator. In our interpretation, if monetary policy focuses on headline inflation it will not only increase overall price level volatility but it will induce employment volatility as well. ForFri, 26 Oct 2007 15:47:16 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-10-26.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-10-11.html· The uncertainty about future developments in the economy implies, to some degree, a higher uncertainty as whether or not further cuts will be necessary · Inflation appears to be contained, at least in the short term, and the readings on core inflation continued to be favorable Members of the FOMC recognize the “unusual nature” of the current financial shock by expressing their concerns regarding the validity of current economic data as a gage of economic activity. The depth of the negativeThu, 11 Oct 2007 09:05:20 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-10-11.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-09-20.htmlThe FOMC cut the fed funds rate by 50 basis points to 4.75% and lowered the discount rate by the same amount The statement shows concern about the potential impact on growth of tightening credit conditions, the disruption in financial markets and the ongoing housing correction Unless conditions improve in the near future, which is not likely, the FOMC could lower rates to 4.25% by the end of the year Prior to the meeting there was uncertainty as whether the FOMC would implement a 25 or a 50 bpThu, 20 Sep 2007 10:55:10 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-09-20.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-08-02.htmlNo significant changes to next week’s statement Hawkish sentiment will continue Fed funds rate will remain at 5.25% Economic trends on track to meet the recently adjusted FOMC outlook We do not expect any significant changes to the statement as economic performance matches Fed’s expectations. Data suggest that FOMC growth outlook of “a little below” potential for 2H07 and then rising in 2008 to a pace “broadly in line with potential output growth,” is likely to occur. Thus, the below averageThu, 02 Aug 2007 07:20:53 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-08-02.htmlhttp://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-07-20.htmlRisks to economic growth “more balanced” Inflation level is “favorable” but moderation trend is not yet convincing Fed funds target will continue to be 5.25% “More balanced” risks to growth while upside risks to inflation persist According to the FOMC minutes, “Risks to growth were more balanced than at the time of the May meeting.” The balance primarily stems from the improvement in business spending data that was available between the May and June meeting. Moreover, members anticipateFri, 20 Jul 2007 07:28:18 GMThttp://www.fxstreet.com/fundamental/interest-rates/e.economicos@bbva.bancomer.com (BBVA Bancomer)http://www.fxstreet.com/fundamental/interest-rates/us-fedwatch/2007-07-20.html