What to Expect Out of Tomorrow’s FOMC Meeting

What to Expect Out of Tomorrow’s FOMC Meeting

From orbex.com

There is a pretty strong consensus forming that the Fed is going to increase the pace of the taper at their next meeting. But they haven’t so much agreed on how much that increase will be. That allows for some wiggle-room in market forecasts. So, we could have a larger market reaction to the data, and this could be more pronounced in light of the circumstances. Last Friday, the market had a modestly positive reaction to record CPI data. That’s because it was expecting even worse data than the average of economists. The market does appear to agree with the Fed that inflation will moderate over time, but it has a ... (full story)

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Dec 14, 2021 9:26am

Here's the readers digest version for tomorrow's FOMC:

1. Taper has already started and will continue
2. 2 interest rates hikes in 2022 beginning in June
3. FED is data dependent so #2 may come in April

4. FED will be extremely co-operative with current administration and aware of the EM so rates don't increase too fast too soon.

fxsport

Dec 14, 2021 12:53pm

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Quoting sh.bangash

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@fxsport, could you elaborate its effecr on Dollar Index in short and medium term? Thanking you for reply.

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Since you asked - this is MY interpretation.

1. The FED will announce that the tapering process has already begun (they actually stopped some purchases in November). The purpose of the FED buying bonds was to purposefully keep rates low and it worked; too good. The USA economy doesn't need any additional stimulus so the FED bond purchases stopped

2. The FED will release their "dot plots" showing how many interest rate hikes they anticipate. I believe that they will have two (2) rate hikes planned for 2022 and 1-2 planned for 2023.

3. The FED will re-iterate that they are data dependent - telling the market they will change as the market changes (yeah right

) The FED knows what they are doing and by keeping rates low it doesn't "shock the system". If rates rise too quickly the USA will be unable to pay the interest on their debt. In addition many of the emerging markets (EM) currencies are tied to the $ so raising rates really hurts those countries.