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We expect a great deal of debate among FOMC policymakers over the path of hike. Last time when the committee met, it was back in January, time of weaker economic dockets, lower oil price and massive volatility in financial markets.
But that is not the case now. Economic data points that even after December hikes economy and labour market is holding up pretty well. According to FED vice chair Fischer, initial stirrings of inflation can be seen.
Focus will be on the followings
- Policy decision – What the policymakers will decide in today’s meeting. Most of the analysts including us at FxWirePro and economists expect FED to hold interest rates steady at current level of 0.25-0.5%.
- Economic forecasts – Changes in economic forecast would provide a general feel, how participants are viewing the economy ahead. Key will be the inflation forecast. Any major changes on inflationary front may means FED likely to turn hawkish going ahead.
- Dot Plot – As of now there exits serious disparity between market and FED policymakers. As of December forecast FOMC participants were forecasting four hikes in 2016, while market was predicting two. Now market is predicting just one, so it would be vital to watch out how the gap stands. Large gap could still send a hawkish message, while narrowing would act as bearish for Dollar.
- How divided is the board – While December hike was unanimous, today’s policy announcement may be well divided. Greater the division, greater will be the strength of hawkish bias. It would also be possible to identify the hawks and doves.
- FED’s assessment of January risks – In January meeting, FOMC participants suggested that they need more time to assess the impact of January turmoil over US economy. So is FED ready to post its risk assessment. This would be main setting tone of the bias.
- Press conference – As always Ms. Yellen’s press conference would be one of the most vital piece, where Q&A likely to provide more clarity especially over various issues such as high rates of defaults in high yield sector or increase in risks in auto sector.
Dollar index is currently trading at 96.88, up 0.25% for the day.
