Global markets eye Fed decision: What messages are expected?
The Fed's interest rate decision and the messages to be delivered by Fed Chair Jerome Powell are being closely watched in Turkey and global markets. Along with the announced decision, the dot plot reflecting the projections of Fed officials will also be followed.
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Capable of critically altering pricing The Fed decision will be announced at 21:00 Turkey time. Along with the decision taken, the dot plot containing the interest rate and other economic data projections of Fed members will also be published.
Fed Chair Jerome Powell will appear before the cameras at 21:30.
All economists participating in the Bloomberg survey predict that interest rates will be left at the 5.25-5.5 percent level. It is not among the expectations that the Fed will signal an imminent start to interest rate cuts.
Although Fed members are entering their critical meeting in the shadow of inflation figures that have come in higher than expected in recent months, the fact that the unemployment rate has also reached a two-year high may ensure that the messages coming out of the meeting are more balanced.
"A DOVISH SURPRISE..."
According to Bloomberg Economics, there will be no change to the expectation of a 75-basis-point rate cut in 2024, as seen in the latest dot plot. Reminding that Powell has been sensitive to signals of slowing economic activity in the past, Bloomberg Economics Chief US Economist Anna Wongstated that Powell could deliver a dovish surprise.
Citigroup Economist Veronica Clark, meanwhile, highlighted that only two Fed members need to lower their projections for the median interest rate forecast to drop from 75 basis points to 50 basis points.
IT WILL BE AN IMPORTANT CLUE
Clark "We believe the Fed is comfortable with its current position. However, this (a reduction in the median projection) is a risk factor" he said. In the decision statement, regarding interest rates, "it will not be appropriate to reduce interest rates until there is greater confidence that inflation is moving sustainably toward the target" no change is expected in the phrase. How the labor market is described in the text will also be an important clue.
At the January meeting, the Fed had described the unemployment rate as "low." According to Bank of America economists, this definition in the new decision text could be "unemployment has risen but remains low" may serve as a substitute for the statements.