Freeze outlook dominates… “It is likely to be lowered in the second half of next year.”
Pay attention to Powell’s interest rate forecast, rise in government bond yields, etc.
FOMC scheduled to announce interest rate decision at 3 a.m. on the 2nd
Amid the prevailing forecast that the U.S. Federal Reserve System (Fed) will freeze interest rates at this regular meeting of the Federal Open Market Committee (FOMC), the market is paying attention to the message of Federal Reserve Chairman Jerome Powell rather than the interest rate decision.
On the 31st (local time), CNBC predicted that there is a high possibility that this regular meeting will be concluded without the Federal Reserve taking any action as the market wants.
CNBC said that although the inflation rate is slowing, it is still excessively high and the economy is growing at a solid pace despite the record-high base interest rate, and that there is a high possibility that interest rates will be frozen at this meeting.
In FedWatch, the Chicago Mercantile Exchange (CME) group, the probability that the Federal Reserve will freeze the current base interest rate of 5.25-5.50% is 97.7%, and the probability of cutting it by 0.25% point is reflected at 2.3%.
Bank of America (BoA) credit strategists said in a note, “It is likely that interest rates will remain unchanged even though gross domestic product and employment are accelerating.” “It is highly likely that they will emphasize again that ‘we are making progress,’” he predicted.
Investors are paying attention to signals from Chairman Powell and Federal Reserve members regarding the direction of future interest rate policy.
Josh Emanuel, chief investment strategist at investment advisory firm Wilshire, told CNBC, “It’s unlikely the Fed will do anything (at this meeting), but it’s interesting to see what message it will send.” He added, “What Chairman Powell most wants to avoid is accidentally being too hawkish.” It appears hostile. “We are already starting to see a bit of a technical breakdown in the stock market,” he pointed out.
The market is sensitive to how long the Federal Reserve will maintain interest rates. Stocks have been falling over the past two months, and U.S. Treasury yields have hit a 16-year high.
For this reason, it is expected that the market will move according to the interest rate forecast presented in Chairman Powell’s press conference message after the regular meeting and the FOMC statement.
David Doyle of Macquarie Group said, “Chairman Powell’s remarks may move the market more than the FOMC statement,” and predicted that the market will be paying close attention to Chairman Powell’s views on changes in government bond yields.
However, some analysts believe that the Federal Reserve may carry out an additional hike as inflation continues to run high.
Matthew Ryan, head of market strategy at Evuri, said, “We will not yet send a signal that austerity policy is over,” and predicted, “We will emphasize that there will be no interest rate cuts for the time being as a compromise and that quantitative easing will begin in the second half of 2024.” .
On the same day, the U.S. Treasury’s quarterly government bond repurchase plan worth $33.7 trillion (about 4,5737 trillion won), the Department of Labor’s September jobs report, and ADP’s national employment report are scheduled to be announced, attracting market attention.
The results of the FOMC’s regular meeting will be announced at 3 a.m. on the 2nd, Korean time.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.