What To Watch For In the Federal Reserve Decision

It is assumed by most observers that a quarter-percentage point rate hike is a “virtual lock” at the this week’s Federal Reserve Open Market Committee meeting.

Even so, there is uncertainty about future moves by the Federal Reserve.

Fed Chairman Jerome Powell will chair his first interest-rate policy committee meeting on Tuesday and Wednesday.  At the end of the meeting, the U.S. central bank will issue a rate decision at 2 p.m. Eastern.  Powell will follow with his first press conference at 2:30 p.m.

Here are the five thing Fed watchers will examine in determining the Fed’s stance.

The first is whether the Fed will forecast 4 rate hikes this year.

In the last forecast round in December, the median Fed forecast looked for three hikes this year.  Most economists see the Fed sticking to this forecast.  However, others think the odds tilt in favor of the outlook increasing to four hikes. “The difference between a four 2018 hike median and three 2018 hike median is probably going to be one vote.”  This according to Thomas Simons, an economist at Jefferies.

Blake Gwinn, a strategist with NatWest, said the 10 year Treasury note already has some possibility of a move to four priced in.

Meanwhile, Goldman Sachs issued a warning to investors that they see “financial fragility” in the financial markets.  By this they mean that there will be big swings in prices that are caused by breakdowns in the markets themselves.

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