FOMC Interest rate decision (FED) | News & Analysis


Powell speech: US economy is at inflection point

The US economy is at an inflection point. We're going into a period of faster growth, more job creation. The main risk is another spike in cases. We have developed significant in-house expertise on the pandemic in the last year. The Fed does not comment on fiscal policy. Current level of debt is sustainable. This is not the time to prioritize debt concern. Over time, in longer-run, US federal budget is on unsustainable path. We've said we expect to keep rates where they are until meet three-part test.

FED'S LAST EMERGENCY MEASURES REVIEW

Fed’s Mester: The economic outlook is brightening – CNBC

“The support from fiscal and monetary policy should lead to a strong 2nd half,” Cleveland Fed President Loretta Mester said on Monday during her CNBV appearance. The Fed policymaker also praised the recent recovery in jobs report while citing concerns as the employment indicator is still 8.5 million below the pre-pandemic levels.

FED Latest News

FED Latest Analysis



March Fed decision review


January Fed decision review

Thoughts on the January 27 FOMC meeting

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.”


December Fed decision review


November Fed Decision Review

Fed Analysis: Powell adds fuel to the market fire by defending QE, rally set to extend

The Fed has left its rates unchanged as expected, making minor changes to the accompanying statement. At first, it seemed that the world's most powerful central bank was succeeding in not rocking the boat, striking a balance between expressing content about the recovery so far but airing concern about the risks of the virus. However, when Federal Reserve Chairman Jerome Powell began speaking, he gave the market reasons to tune in. He began by saying that the pace of the recovery has moderated. That served as a hint that the Fed is ready to act.

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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.

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.



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