FOMC, Dollar, S&P 500, ECB and BOE Rate Decision Talking Points:
- The Federal Reserve hiked its benchmark rate 25bps to a range of 4.50 – 4.75 percent
- The US benchmark is higher than its principal global counterparts, but that advantage has been previously priced in
- In the policy statement that accompanied the decision, the group said ‘anticipates that ongoing increases…will be appropriate’
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Trading Forex News: The Strategy
The Federal Open Market Committee (FOMC) announced a 25 basis point increase in its benchmark rate range to 4.50 – 4.75 percent. The increase was a further step down in pace from the 50 bp increase in December and the 75 bp hike in November – following a stretch of four consecutive such heavy hikes. The increase in the benchmark rate was in-line with the consensus forecast from economists and the market itself via Fed Fund futures, so it was perhaps not a surprise that the initial market response centered on volatility without a clear view on direction.
With the market’s looking for clues to the Federal Reserve’s ultimate top for its benchmark lending rate, the monetary policy report offered some conflicting signals. On the one hand, the group mentioned that inflation had ‘eased somewhat but remains elevated’ – removing the references to volatile energy and food components. The maintenance of the remark that the group “anticipates that ongoing increases in the target range will be appropriate in order to…return inflation to 2 percent” is an unexpected hawkish perspective.
Some of the highlights from Fed Chairman Jerome Powell’s press conference following the rate decision include:
Hawkish Overtone
- The discussion is around ‘a couple more rate hikes to get to appropriately restrictive stance’
- FOMC will make decision on a meeting-by-meeting basis
- Full effects of the rapid tightening cycle has yet to be fully felt
- Suggests they are discussing a couple hikes to get to more restrictive stance
- Taking pauses between meetings was not discussed
Dovish Overtone
- Says the Fed will need to stay restrictive for some time
- Will need more evidence of inflation pressures weakening to be confident it is under control
- Will likely need to maintain a restrictive policy stance for some time
- Encouraging to see the ‘deflationary process has started’
FOMC Scenario Table
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Chart of S&P 500 Emini Futures with Volume (5-Minute)
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Chart of the DXY Dollar Index (5-Minute)
Chart Created on Tradingview Platform
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Table of Relative Monetary Policy Standing
Table Made by John Kicklighter
Table of Relative Monetary Policy Standing
Table Made by John Kicklighter
