The US Federal Reserve (Fed) holds Federal Open Market Committee (FOMC) meetings today and tomorrow. While no changes are expected within the scope of the meetings, the changes that can be made in the decision text and verbal orientation are reflected in the markets.
Asian Chief Economist Mickey Levy does not expect the Fed to make any changes in monetary policy, Anadolu Agency reported. Levy states that a statement can be made in the FOMC decision text stating that “inflation over 2 percent may be preferred for low inflation in recent years as a regulation strategy”. However, Levy stated that the Fed’s estimates could revise the growth upwards for 2020 and revise the unemployment data downwards. Recent meeting minutes and speeches made it clear that the FOMC is considering forward steering based on a range of possible calendars and results. The most likely outcome is that it will formalize the Fed’s departure from viewing maximum employment as a constraint that would lead to rate increases.
Rabobank Senior US Strategist Philip Marey said that some fluctuations could come together in the fourth quarter, which could disrupt the economic recovery. The developments of Marey that may cause fluctuations are as follows:
- Second wave expectation in Kovid-19
- Elections open to discussion
- Civil turmoil
- Tensions with China
All of these can come together to form a “poisonous cocktail”, according to Marey.
Coronavirus Vaccine and Markets
Compared to Bloomberg HT, gold prices soared before the Fed’s critical meeting this week, where signs of the policy outlook could come.
However, the markets have turned their eyes to the latest developments in the coronavirus vaccine. While countries and companies are making vaccine announcements one after another, investors follow this situation closely.
However, after the FOMC meeting, policy makers are not expected to change an important issue. What matters for the markets is whether or not to change their current guidance on how long the benchmark rate will remain near zero. An update is not expected in this regard. However, it is stated that such a change may occur soon.