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Fed meeting: will there be any surprises?

Заседание ФРС: будут ли сюрпризы?

The Federal reserve today will announce its rate decision, however, likely to change anything at this time will not be. More importantly, what signals Janet Yellen will give the market.

So, the range of rates fedfunds will probably remain at the level of 0.25-0.5%. In December, the Committee on open market operations has actually promised to raise in the course of the year four times, but after a stormy January and February in this few people believe, at least in this market certainly doesn’t.

The March meeting, I wonder what it will be published economic forecasts and projections for the rate for the first time since December.

If the fed wants to continue to pretend that the American economy all goes well, then investors may expect any hints that rates will continue to climb, only a little later.

If we talk about market expectations, investors apparently did not believe in the scenario with four rebounds this year, and now the futures on bet and does indicate a single rate increase.

Some experts believe that at this stage the fed will reduce the forecast rate increase this year by up to three times and for the market it would not be a surprise.

At the last meeting of the operations Committee on the open market was removed from the final statement the phrase about balanced risks and stated that it “closely monitors economic and financial developments in the world and assesses their implications for the labor market and inflation, as well as the balance of risks to forecasts”.

However, additional comments today we will hear directly from the mouth of Janet Yellen: her press conference will be held at 21:30 Moscow time.

Note also that the fed is always trying to control the value of the dollar, but now it is not clear what need the dollar: weak or strong.

U.S. currency in the past two years showed a rapid growth, but now they slowed down, although the rates positive States, and in Europe and Japan is negative, so there will be drawn a separate map.

As we can see, the us dollar is near the lows for the last four months, while hedge funds have reduced bets on his strengthening to a minimum since 2014
For the week ended 8 March, the major market participants reduced their bets on rising dollar against eight major currencies to 112,848 thousand contracts, although even in November there were almost 428,298 thousand Such data leads the Commission on trade commodity futures the United States.

This time, incidentally, plays into the hands of the fed, it can at least once, but to raise rates. On the other hand, if the fed will give hawkish signals and the traders will start to play to strengthen, then say, in September, Yellen and company will easily be able to explain their inaction is too strong strengthening of the dollar. Something similar we have already seen.

The fed it’s time to teach the market

Every time the Federal reserve is preparing to increase rates, its representatives begin to systematically prepare the market for this event, then to avoid violent reaction and excessive volatility, however, these methods should go into the past, writes MarketWatch.

If you look at the expectations of market participants before meetings of the fed, it is possible to notice an important thing: the fed never raises rates, if the market is not sure at least 60%.

This approach to some extent contradicts the statements of the fed, as the regulator wants in words, each meeting was held in the so-called live mode, which means the possibility of increasing at any meeting.

On the other hand, the actions by the fed help to minimize the volatility, at least in theory it is. However, increasing the bet when no one is waiting, the regulator could break the cycle.

Actually, another great question, like if the fed ever to surprise the market. There is a perception that the U.S. Central Bank and the largest banks of wall street at the end.

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