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Fed Decision Day Guide from Government Shutdown to No Tapering - (Bloomberg)

Posted by Chris Advincula on Oct 30, 2013 7:14:00 AM

Here’s what to look for when the Federal Open Market Committee releases its statement tomorrow at 2 p.m. after a two-day meeting in Washington. The panel won’t provide new economic forecasts, and Chairman Ben S. Bernanke won’t hold a news conference.

-- A decision to maintain the current pace of bond purchases at $85 billion a month, according to Eric Green, global head of foreign exchange, rates and commodities at TD Securities USA LLC in New York. The Fed will probably delay the first reduction in its bond purchases until March, the median of 40 responses in a Bloomberg survey of economists showed.

-- It’s “not a realistic time to make any fundamental changes, given its proximity to the recent shutdown, weaker economic momentum, and markets priced for a generally status-quo outcome,” Green wrote in a research note.

-- Some mention of the 16-day partial U.S. government shutdown in the statement, according to Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. in New York. The Fed may also modestly downgrade its descriptions of employment and housing, in Feroli’s view.

-- A change to the statement’s characterization of financial conditions, which last month’s statement said were tightening and could slow economic improvement.

-- “The question is, what will the FOMC focus on -- the fact that conditions are still tighter than the Fed would like them to be, or the fact that they eased over the intermeeting period?” Roberto Perli, a partner at Cornerstone Macro LP in Washington, wrote in a note. “If it chooses the latter, it would be another indication that the Fed doesn’t think December is off the table in terms of tapering.”

Rate Guidance

-- No change to the Fed’s guidance on the future course of interest rates, according to Michael Hanson, senior U.S. economist at Bank of America Corp. in New York. The FOMC repeated its pledge last month to maintain its benchmark rate near zero at least as long as unemployment is above 6.5 percent and the outlook for inflation is no more than 2.5 percent.

-- “With the markets pushing out the expected date of the first Fed rate hike, there is no urgency to change guidance now,” Hanson wrote


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