Federal Reserve likely to leave interest rates unchanged at November policy meeting, says Lloyds Bank

The United States Federal Reserve is expected to leave its policy interest rates unchanged at its October 31 – November 1 policy meeting. The Fed has given no indication that a rate move next week is being seriously considered and financial markets are attaching virtually zero probability to such an outcome.

As a result, policy rates are likely to remain in the current 1 percent to 1.25 percent target range. The Fed is also unlikely for now to make any further changes to its quantitative easing programme. At the previous meeting in September, the Federal Open Market Committee (FOMC) signaled that from October they would start to gradually run down the asset holdings built up as a result of QE.

The initial reduction was pegged at about USD6 billion for US Treasury bonds and about USD4 billion for mortgage-backed securities. Previous announcements indicate that these levels will be raised at three-monthly intervals and so an increase can be expected in December.

The November FOMC meeting is not followed by a press conference nor will there be an update of economic forecasts, so the only immediate signal from the Fed will be the press statement. The Fed has tried to avoid surprising financial markets with its previous interest rate hikes and will probably also want to continue to do so in December. However, as markets are already attaching close to an 85 percent probability of a rate increase before year-end, there seems little need for a stronger signal at this stage.

Meanwhile, FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest