FOMC Rate Decision & Statement

FOMC Rate Decision & Statement will be released today at 7pm London time. This event will likely see volatility and widening of spreads in the seconds before release. We advise against holding USD positions unless they are already at break-even. Even if the position are at break- even, also consider other factors such as potential slippage, and your brokers practices during extremely volatile events.

FOMC Rate Decision & Statement

The FOMC meet to decide the Federal Funds Rate, which is the interest rate at which depository institutions lend balances held at the Federal Reserve to other depository institutions overnight. They announce their decision alongside a statement. The FOMC Statement is the primary tool the FOMC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes. The FOMC usually changes the statement slightly at each release; it’s these changes that traders focus on.

Four times per year the FOMC also publish a report for Economic Projections. This report includes projections for inflation and economic growth over the next 2 years and, more importantly, a breakdown of individual FOMC member’s interest rate forecasts. On the occasions where the Statement is accompanied by Economic Projections, the FOMC also holds a press conference. The press conference is about an hour long and has 2 parts; first, a prepared statement is read, then the conference is open to press questions. The questions often lead to unscripted answers that create heavy market volatility.

Summary:

At the Fed’s March meeting and at subsequent speeches following, Fed Chair Yellen has presented a significantly dovish stance in regards to rate hike expectations and more specifically her outlook on US inflation. Inflation data since March 16 however has disappointed with CPI and PCE printing below expectations. As such rate hike expectations for April stand at 0% with market focus likely to be on the accompanying statement with particular attention placed on any comments which may provide insight into the likelihood of a hike in June.

This release was also covered in our weekly risk events video here.

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