Today’s FOMC Meeting will probably not surprise the market as much, considering that the Fed has kept rates at around 0.25% for the past three years, injected two rounds of Quantitative Easing (QE1 and QE2) into the economy, plus Operation Twist by swapping shorter-term bonds with longer ones, there aren’t much left for the Fed to do except for wait and see…
US Interest Rate
Today’s FOMC Meeting will probably not impact the market as much, as the Fed probably ran out of new measures to stimulate the economy. As a matter of fact, most analysts agree that the Fed will be leaning towards providing a “clearer guidance” rather than a policy change, or in other words, inflation and unemployment targets for rate changes… With the Fed keeping rates at around 0.25% for the past three years, adding two rounds of Quantitative Easing (QE1 and QE2), Operation Twist by swapping shorter-term bonds with longer ones, and the latest joint liquidity operation with other central banks by cutting the USD swap rate to 0.5% above the OIS, there aren’t much left for the Fed to announce today except for perhaps QE3…
Today’s FOMC meeting goes back to the new format where the committee announces its rate decision and releases the FOMC Statement at 12:30pm, then Tripple B (Big Ben Bernanke) hosts a press conference at 2:15pm, where he is expected to talk about the recent FOMC Statement and answer questions from onsite media members. What is also expected during today’s meeting is a new quarterly Economic Projections, and here is the release for June 22, 2011:
Today’s FOMC Meeting Minutes will probably dredge up memories from the last FOMC rate Statement, where the market took a dive following the FOMC Statement. Here’s the complete statement released by the Feds on September 21, 2011:
Fed. Chairman Bernanke is expected to announce new measures today to further ease the long-term interest rate while try to resuscitate the ailing economy suffering from perhaps the worse recession since the 1920s. Since Bernanke’s announcement in Jack Hole, Wyoming on August 26, of changing September’s Fed meeting from a single day to two days, market has been speculating that Bernanke is up to something… as a matter of fact, many analysts are predicting that Bernanke will do one of three things:
While the market isn’t expecting any changes in today FOMC Federal Funds Rate decision, the accompanied Statement and the Press Conferece at 2:15pm are potentially trend changers. With S&P’s recent downgrade still affecting the market, Bernanke will have a chance to calm the market today. Understand that even though there are no expectation of QE3, it is widely believed that Bernanke will stick to his “All the Options” are on the table speech, signaling that further easing has not been ruled out…
Today’s FOMC Minutes will probably not be a market mover because almost everything was covered during Bernanke’s FOMC Press Conference immediately after the rate decision on June 22, 2011.
However, given the recent events, namely the NFP release on Friday, we could expect some renewed speculation for further Fed action, possibly even lead to QE3. But realistically speaking, considering that this Minute is for the rate decision 20 days ago, we’ll probably not see strong market volatility UNLESS there were extensive discussions on further stimulus or concerns that may add to the current risk aversion sentiment… if that’s the case, then expect to see some weakness in the USD.
