The Fed, finally
|Here we are, the last FOMC meeting of the year. According to the latest Bloomberg survey, the Federal Reserve is expected to lift short-term interest rates by another 25bps - which would bring the target band up to 2.25%-2.50% - to the highest level since March 2008. The chances that Jerome Powell would stand idle today are very thin as the Fed had already widely communicate on a December hike. Backpedalling would send a terrible signal to investors as it would suggest that the US economy could not withstand another rate hike.
Therefore, we expect that the Federal Reserve would come with a dovish hike. During the press conference, Jerome Powell would provide little guidance and emphasize the need for optionality. In other words, the Fed would not commit to any further tightening move and stick to a data-dependent approach.
Stay on top of the markets with Swissquote’s News & Analysis
The big question now is how will the market react? Both the financial and economic backdrops, as well as the huge amount of private and public debts, have made investors less and less confident regarding further increase of borrowing costs. Jerome Powell will therefore have the difficult task to deliver a dovish hike, while remaining at the same time positive about the economic outlook. It promises to be an interesting day in both the equity and FX market. On Wednesday morning, the greenback was trading lower against most of its peers at traders brace for impact, while global equities were grinding higher, suggesting that the Fed would indeed switch to a more dovish stance.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.