Will Yellen Give a More Hawkish Outlook ?

15 March, 2017

The Fed will announce its interest rate decision and monetary policies, at 18:00 GMT today. Later, the FOMC press conference will be held at 18:30 GMT.

Markets have been expecting a March rate hike for a period, the expectations have been largely priced in since February. Therefore, even the Fed Chair Yellen announces a rate hike today, it would be just in line with market expectations.

The Fed will probably raise rates by 25 basis points this time, to a range of 0.75% to 1%, which is the third time of a rate hike in a decade. However, now what matters more is how many times the Fed will raise rates later this year, and its latest economic projections. The Fed had projected three rate hikes in 2017 in the December FOMC meeting.

The Fed’s two objectives are maximum employment and stable prices. The recent US labour market data shows the labour market remains solid. The inflation has also seen an uptrend since August 2016.

We can expect volatility; however, the volatility might not arise from the rate decision, but more from the updated economic outlook and new projections. If the Fed Chair Yellen makes a relatively hawkish comment, then the dollar will likely keep on strengthening.

Nevertheless, if the Fed surprisingly doesn’t raise rates today, then it will also likely cause great market volatility.

The Japanese industrial production released this morning for January (YoY), reaching the highest level this year.

We will see the release of a series of UK and EU labour market data for January and February, between 09:30 – 10:00 GMR today, which will likely cause volatility to the Sterling and Euro.

It will be followed by US retail sales and CPI data for February, at 12:30 GMT, which will likely cause some volatility to the dollar and the dollar crosses, prior to the FOMC meeting.

On Thursday 16th March, there will be three central banks announce rate decisions and monetary policies. The Bank of Japan, at 02:00 GMT, followed by the Swiss National Bank, at 08:30 GMT. Finally, the Bank of England, at 12:00 GMT.

The market estimates are that the three central banks will likely keep rates unchanged.

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