CAD Awaits Fed FOMC Statement



When it last met in late January, the central bank’s policy-setting group, the Federal Open Market Committee, reiterated that it “can be patient in beginning to normalize the stance of monetary policy” given economic conditions.

A change in that language this afternoon would signal that the central bank is poised to hike its benchmark fed funds rate, now effectively zero, as the U.S. economy, notably the jobs market, perks up.

“With the labour market still evidently on fire in February, we expected the FOMC statement … to omit the language that the Fed can be ‘patient’ in beginning to normalize monetary policy,” said Paul Ashworth of Capital Economics.

“Even with headline inflation below zero, we then anticipate a first hike in June, with the FOMC pushing the target range for the fed funds rate to 1 per cent to 1.25 per cent by the end of this year and 2.75 per cent to 3 per cent by end-2016.”

While they expect the Fed to lose patience, observers aren’t certain about what exactly the Fed will signal.

“The renewed strength of the USD and its influence in containing inflation pressures (above and beyond weak oil prices …) is an added wrinkle that has some questioning a June lift-off, though that remains our base case,” said Mark Chandler and Paul Borean of RBC Dominion Securities, referring to the U.S. dollar by its symbol.

RBC also expects the Fed to raise its economic growth forecasts today.

via The Globe and Mail

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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