Fed Expected to Hold With Investors Looking at Statement for Clues

Investors’ focus should be set not on interest rates but on forecasts for the U.S. economy when the Federal Reserve meets Wednesday, Credit Suisse’s head of financial market analysis told CNBC, suggesting that markets may need to brace for further rate hikes ahead.

The central bank is widely anticipated to hold interest rates at 1 percent when it releases its policy decision at 2 p.m. EDT (1800 GMT) Wednesday.

However, Fed chair Janet Yellen’s comments could point to an “opportunistic approach” to tightening, according to Joe Prendergast, who said he expects further interest rate hikes than the two largely priced in by markets.

“The big focus from a financial market point of view will be on the statement that the Fed makes and particularly how they view the softness in Q1 in the real sectors of the economy,” Prendergast told CNBC Wednesday.

“If they really emphasize this is temporary I think we will see a little bit of tightening expectation come back further into the market.

“They’ll probably still tighten through this year a little bit more than the market is currently discounting,” Prendergast added.


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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