China Turmoil Possible Topic of FOMC Statement

The U.S. Federal Open Market Committee is in the midst of a two-day policy meeting after flagging off a historic interest rate hike cycle in December but a slowdown in China and convulsions in global markets could steer it off its course later this year.

After all, the Chinese equity and currency markets have had a rocky start to the year and the world’s second-largest economy is growing at its slowest pace in 25 years. Meanwhile, crude oil prices have plunged to fresh 12-year lows below $30 a barrel, prompting fears of a global recession.

That presents an inclement backdrop for the Fed, whose projections imply four interest rate increases this year.

“The main thing to look out for this week is how much emphasis (the Fed is) going to put on international developments; I think they will highlight these issues again like how they’ve done occasionally in the past and I think that will bring market expectations down to somewhere like one more (rate hikes) this year, maybe two,” said Jesper Bargmann, Nordea Market’s Asia trading head.

“They will mention something (about) the global economy affecting the U.S. economy.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza