FOMC Interest rate decision (FED) | News & Analysis

To taper or not to taper?

Federal Reserve Preview: First up, then down? Playbook for trading the Fed

Yohay Elam
FXStreet

To taper or not to taper? That is the question for markets ahead of the Federal Reserve's all-important June meeting. The world's most powerful central bank buys $120 billion worth of bonds every month and investors are coalescing around a path to reducing these purchases as America's economic situation improves. The short answer is no. Rejecting a change in policy will likely push the dollar down – but forex is never a one-way street and the bank's decision is comprised of several parts that may cause jitters.

Fed Interest Rate Decision Preview: Chair Powell will determine market response

Joseph Trevisani
FXStreet

Markets waiting expectantly for a change in Federal Reserve policy as inflation courses through the US economy and growth soars will be disappointed after its two-day meeting, but the governors are likely to signal that tapering their bond purchases has become an active discussion. The Federal Reserve Open Market Committee (FOMC) statement could offer a more positive view of the US economy as a prelude to policy shift, but the gradations of optimism will probably be left to Chair Jerome Powell in his press conference appearance...

FED'S LAST EMERGENCY MEASURES REVIEW

Fed's George: Do not dismiss risk of higher inflation

By Ross J Burland |

Federal Reserve Bank of Kansas City President Esther George said that it is hard to distinguish between one-off 'bottlenecks' and broad lack of capacity. ''Do not dismiss risk of higher inflation.'' ''Fed should not be 'rigid' in approach to policy, or lose sight of possible changes to the economy as it reopens.''

FED Latest News

FED Latest Analysis

April Fed decision review

April FOMC: A subtle change in tune

Wells Fargo Research Team
Wells Fargo

The April FOMC meeting statement and opening remarks from Powell's press conference struck a slightly more optimistic tone but did nothing to dissuade expectations that the current stance of policy will remain unchanged for months to come. While acknowledging a clear pickup in activity since its March meeting and inflation closer to its 2% goal, the FOMC left its forward guidance around the fed funds rate and asset purchases unchanged.

March Fed decision review

January Fed decision review

Thoughts on the January 27 FOMC meeting

Wells Fargo Research Team
Wells Fargo

As expected, the FOMC made no major policy changes at today's meeting. That said, the committee did note that the recovery has moderated in recent months and stressed that the outlook remains critically dependent on the course of the virus. In our view, the FOMC is more likely to provide “too much” accommodation in coming months rather than “too little.”

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Editors' Picks

AUD/USD: Rebound remains capped below 0.7700 ahead of FOMC

AUD/USD: Rebound remains capped below 0.7700 ahead of FOMC

AUD/USD is wobbling around 0.7680-90, bouncing off a weekly low ahead of the key FOMC policy decision. Pre-Fed caution trading, mixed US data and a scarce news flow contribute to the aussie's sluggish performance.

AUD/USD News

Gold: Turns south, 200-DMA back in sight ahead of Jerome Powell

Gold: Turns south, 200-DMA back in sight ahead of Jerome Powell

Gold price is heading back towards the 200-Daily Moving Average (DMA) at $1840, as sellers returned following a rejection once again near $1860. The US dollar continues to hold the higher ground ahead of the all-important FOMC decision due later this Wednesday.

Gold News

FOMC Preview: Taper talk and impact on dollar

FOMC Preview: Taper talk and impact on dollar

The outcome of Wednesday’s Federal Reserve monetary policy announcement could set the stage for how the U.S. dollar and currencies trade over the next month. With that in mind, the greenback maintained its bid ahead of rate decision.

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EUR/USD: Bulls coming up for air into the Fed

EUR/USD: Bulls coming up for air into the Fed

EUR/USD is riding the trendline support towards the 61.8% Fibonacci retracement level of the prior bearish impulse. The crosses are also poised for upside continuations in EUR/JPY for instance were bulls need a clean break of 133.50.

EUR/USD News

Shiba Inu ready to reverse to $0.0000050

Shiba Inu ready to reverse to $0.0000050

SHIB price faces stiff resistance ahead. Shiba Inu has had a difficult time recovering, suggesting that it may soon face rejection. In the following video, FXStreet's analysts evaluate where SHIB price could be heading next as Shiba Inu gets weaker.

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Big Picture

What's important about Federal Reserve’s monetary policy meeting?

With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks.

In the US, the Board of Governors of the Federal Reserve (FED) meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency.

If rates remain unchanged, attention and also main news and analysis turn to the tone of the FOMC (Federal Open Market Committee) statement, and whether the tone is hawkish, or dovish over future developments of inflation.

What is the Fed?

The Federal Reserve System (Fed) is the central banking system of the United States and it has two main targets or reasons to be: one is to keep unemployment rate to their lowest possible levels and the other one, to keep inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

Fed official website, on Twitter and Facebook

How to trade the event?

  • Do not rely on the Fed to determine the direction of the dollar in the coming months.
  • The dollar tends to follow its predominant trend when the Fed starts to hike rates.
  • There is no direct link between the Fed hiking rates and the usd falling. When a weak usd has coincided with a Fed hiking cycle, it has been falling for some time.
  • Due to this, we may see a muted reaction to a potential Fed rate hike.

WHO IS FOMC'S CHAIRMAN?

Jerome Powell

Jerome PowellJerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.

Jerome Powell Fed's Profile and Wikipedia

The World Interest Rates Table

The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.

FED educational resources