2024-01-03 11:42:00
© Archyde.com Does the Federal Reserve minutes enhance the possibilities of a US interest rate cut in March?
FXNEWSTODAY – Today, Wednesday, global financial markets are awaiting the release of the minutes of the Federal Reserve’s latest monetary policy meeting, with the aim of obtaining a clearer vision regarding possible cuts in interest rates in the United States.
During its last meeting in 2023, the US Central Bank announced the end of the current cycle of raising interest rates, and indicated the start of discussions on interest cuts during 2024.
The Federal Reserve has hinted at making larger and deeper interest rate cuts this year than previously expected, thanks to the progress it has made in the inflation battle.
Accordingly, the markets began to price high futures contracts for the possibility of reducing US interest rates this year, and expect cuts of regarding 150 basis points, in contrast, the Federal Reserve expects cuts of regarding 75 basis points only.
Because of this, the US dollar and revenues incurred heavy losses last December, with levels recorded at the lowest levels in five months, due to the acceleration of buying and selling US government debt.
It is expected that the minutes will include many clear pieces of evidence regarding the future path of US monetary policy and interest rates, which will help in setting new pricing for futures contracts for cutback possibilities starting from the next March meeting.
Timing of the record
By 19:00 GMT, the Federal Reserve will publish details of the meeting held on December 12-13.
Meeting decisions
The last monetary policy meeting of the Federal Reserve in 2023 included many statements, expectations, and comments, which we can summarize in the following points: –
• The Federal Reserve kept interest rates steady without any change at the range (5.25% to 5.50%), which is the highest range since 2001, for the third meeting in a row.
•Economists said that maintaining interest rates for two consecutive meetings is an indication of a temporary cessation of monetary tightening, and that maintaining interest rates for three consecutive meetings is tantamount to the end of monetary policy tightening.
The Federal Reserve said: Members of the Open Market Committee will monitor a range of data and developments to see whether “any” additional tightening of monetary policy is appropriate. This word was not present in the previous meeting statement.
•Jerome Powell explained in the press conference that this amendment indicates that although the central bank is approaching the peak of monetary policy tightening, the committee does not want to rule out the option of raising interest rates as a possibility.
•The Federal Reserve adjusted the target interest rate during the quarterly economic forecasts report during 2023 to 5.50% from 5.75% in the September forecast, the target interest rate during 2024 to 4.75% from 5.25%, and the target interest rate during 2025 to 3.75% from 4.0% in Previous forecasts.
•The above point means that the Federal Reserve expects cuts of at least 75 basis points during the next year (2024).
•Powell hinted that Federal Committee members began discussing the possibilities of lowering interest rates at this meeting for the first time, pointing out that these possibilities were not discussed in previous meetings.
American interest
Futures pricing for the possibility of a 25 basis point cut in US interest rates during the March 20 meeting is currently stable at 77%, and futures pricing for the possibility of a 25 basis point cut during the May 1 meeting is at 98%.
New pricing
The Federal Reserve minutes are expected to provide new pricing for the above-mentioned contracts, so that less hawkish comments boost the prospects of a US interest rate cut in March.
Then the US dollar will enter a new wave of losses in the foreign exchange market, US bond yields will decline, and most global stocks will rise, led by Wall Street markets.
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