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FOMC’s Decision Will Have A Stronger Impact On The Value Of US Dollar

March 15, 2017
By Anatol Thomas
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The Federal Open Market Commission (FOMC) meeting is scheduled on Wednesday and this has the investors eagerly watching the market. The traders and investors are hoping that the meeting will end with an announcement of rate hikes. The market is also aware that the Federal Reserve may make some important changes to the monetary policy to tighten its future, to reduce the inflation rate in the upcoming months.

In the past few weeks, the market is highly driven by anticipation of the policy meeting which could bring about some changes in the US financial system. Initially, the market forecasted that the interest rate will be increased at 40%. However, the market is now 100% sure that there will be an interest rate hike, as a result of the March policy meeting. This means that tightening efforts will be implemented in the next 3 months. The policy curve is already at a hawkish state and the industry continues to bet on it.

In December, the Fed had projected that there will be 3 interest hikes in 2017, increasing the basis points by 75. Now that the market pricing has changed considerably, it is expected that there will most certainly be a fourth and possibly a fifth hike before the end of 2017.

The monetary policy of the USA will also trigger a change in the policies of other nations. Already, the European Central Bank and Bank of Japan have started normalization process to deal with the interest rate hikes. In fact, the FOMC decision will affect the market more than the trigger of Article 50, owing to Brexit negotiations.