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Wednesday, December 19, 2018

Fed Meeting Tonight - Most Watched In Years .... How will it affect the market?

Trump’s Jerome Powell-focused tweets has blasted the Fed for two days running, calling for officials to cease raising interest rates, a level of public pressure no president has put on the Fed in decades.

Federal Reserve began a two-day policy meeting Tuesday, perhaps its most scrutinized session in years. While sentiments on the stock market has been weak, the U.S. jobs market is still strong and the outlook for 2019 is relatively solid, so the case for a hike hasn’t disappeared. 

However, it raises the issue of Federal Reserve policy, which has become more politicised and in this respect, Powell’s comment in a speech at the Economic Club of New York that interest rates remain “just below the broad range of estimates of the level that would be neutral for the economy” has, not surprisingly, been interpreted as dovish by the markets. This is why current market expectations of only two more rate hikes (including December) by the end of 2019. 

Many traders are expecting the Fed to say something dovish tonight that will give the market a “Santa Claus” rally towards the year end. Sifu think this view carry with it much risk, because if Fed signal a pause, it would have been expected, worse still if Powell give in to Donald’s pressure and decide not raise rate tonight , the market will crash for fear that the central bank now see that a recession is plausible.
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