Insights on FED interest rate decision tomorrow

Nenad Kerkez Top-XE

The US Federal Reserve Bank ("the Fed"), has battled to ignite inflation since the GFC and up until now it has raised rates less frequently than the markets have expected, however, this approach may soon change. On Wednesday, the Fed is almost universally expected to raise its benchmark interest rates following strong NFP, full employment and an uptick in inflation.

As inflation is showing signs of a revival, not only in the US but also in Europe, the Fed could signal more than the three rate rises as they have forecast for this year. The 5-year forward inflation expectation rate, a market gauge tracked by the Fed, currently stands at 2.14 percent, up from 1.60 percent one year ago.

If the Fed does not raise rates in the March FOMC meeting, it will surprise financial markets and potentially damage the Fed's credibility. This should bring about some further renewed strength in the USD, and potentially this could shift some funds from Equities and Commodities into Fixed Income.

Author

Nenad Kerkez

Top-XE

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