US FOMC Federal Funds Rate Analysis 06/23/10

FOMC is going to release its short-term interest rate decision today and most analysts agree that FOMC will keep current rates unchanged especially after the series of worse than expected economic data during the past few weeks, including but not limited to housing, employment, and retail sales.

However, even though there is no chance for a surprise rate hike, as predicted by the chart to the left (0.0%~0.25% is about 100% probability) the real focus is the FOMC statements on future monetary policy.  The key point will be once again the statement of “exceptionally low levels of the federal funds rate for an extended period“, or more precisely, the “extended period” phrase, as traders will consider FOMC accelerating its rate hike schedule if this phrase is dropped, or if kept, that FOMC’s stance is likely to remain unchanged.

On June 11, FOMC Hoenig once again expressed his view against the low interest rate and especially the ”extended period” phrase.  This may not be a surprise to most traders as Hoenig has been very open with his view, but this time, Fed. Governor Plosser also joined in with Hoenig by stating that interest rates should be raised sooner than later, and that Fed. Fund Rate of 1.00% would still be accommondative.  Plosser also admitted that he has been uncomfortable with the “extended period” language for some time now…

It is now expected to see at least 2 dissenters in today’s vote, which may add to the possibility of removing the “extended period” phrase, which may increase demand for the USD as this FOMC statement may send out a message of the Feds will hike rates sooner than expected…

The key to trade this release is to wait for the market to make its initial move and then double check on the data.  It is possible that the short to medium term market trend will be changed from this release, therefore having a little of patience will go a long way.

Related posts:

1. Forex Analysis U.S. FOMC Interest Rate 09/21/11
2. Forex News Analysis AU RBA Interest Rate 07/05/11
3. Forex Strategy For AU RBA Interest Rate Decision 08/01/11
4. Forex News Trading AU RBA Interest Rate 04/05/11
5. Forex News Trading AU RBA Interest Rate 05/03/11
6. Forex News Trading Australia RBA Interest Rate Decision 12/06/10
7. Forex news trading for AU RBA Interest Rate 02/28/11
8. Forex Analysis – FOMC Meeting Minutes
9. Forex News Trading AU RBA Interest Rate Decision 01/31/11
10. Forex Trading Strategy on RBA Interest Rate Decision 10/04/10

Tagged as: Bernanke, Current Rates, Expectation, Fed, fed rate, Federal Fund Rate, FOMC, fomc statement, Forex, Forex News, Fundamental News, fundamental outlook, Inflation, Interest rate, interest rate decision, Key Interest rate, monetary policy, NFP, risk appetite, risk aversion, safe haven, Term Interest, US, USA, USD