Fed Statement Expected to be Divisive As Hawks and Doves Disagree

A closely-divided Federal Reserve could produce a policy statement at the end of its two-day meeting that includes something for both hawks and doves, a top central bank watcher said Friday.

It is not entirely implausible that the Fed interest-rate policy committee could include both hawkish and dovish sentiment, said Michael Hanson, chief U.S. macro strategist at TD Securities, in a note to clients. For the hawks, the statement could point to a December rate hike. And for the doves, the statement could play up concern about the low-inflation outlook.

“Our reading is that the voting members of the FOMC are quite closely divided between those who favor another rate hike this year and those who would just as soon be more patient,” he said.

The Federal Reserve will meet Tuesday and Wednesday. There is no press conference or new economic forecasts scheduled, so economists will be left to pore over the six-paragraph statement released at 2 p.m. Eastern Wednesday after the talks have concluded.

The Fed is universally seen as deciding to hold interest rates steady in a range of 1%-1.25%. Central bank officials have been quite open in their public remarks that the next date for any possible rate hike will be at the Dec. 12-13 meeting.

Investors think there is a greater than 80% chance that the central bank will hike rates in December. Expectations rose after Fed Chairwoman Janet Yellen made clear she thinks the Fed should keep raising rates even though inflation is low, and at the last meeting in September, 12 of the 16 Fed officials suggested they were on her side.

via MarketWatch

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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