Fed Expected to Leave Rates Unchanged in Last Yellen Meeting

The Federal Reserve may sound a bit more hawkish as Fed Chair Janet Yellen’s tenure comes to an end.

Yellen was presiding over her final meeting, and the Fed’s post-meeting statement will be released at 2 p.m. Wednesday afternoon.

“They’re not going to raise rates this time around. They do want to at least confirm the market’s expectations for a March rate hike,” said Tom Simons, chief money market economist at Jefferies.

Yellen leaves the Federal Reserve after four years as chair, and in that time she began the slow process toward normalizing interest rates and shrinking the Fed’s balance sheet. Viewed through most of her tenure as a dove, Yellen began the process of reversing extreme crisis-level policy. She had previously served as vice chair to her predecessor, Ben Bernanke, and was president of the San Francisco Fed prior to that.

The Fed is not expected to take any rate action at the two-day meeting, and the market has been primed for a March hike, as well as two others later in the year. That fits with the Fed’s forecast for three interest rate increases this year. But that could change under the incoming chair, Jerome Powell, when forecasts and projections are released after the March meeting. Powell has been a Federal Reserve governor.

Economists expect few changes in the FOMC statement, but the changes Fed officials could make might be significant for market expectations.

“I think if they were to put anything that was perceived as dovish into the statement they would be reducing that [March rate hike] probability. It’s going to be a more bullish commentary about the economy and maybe include something on rising inflation expectations,” said Simons.

To really sound hawkish, the Fed may need more proof.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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