Trading The US FOMC Interest Rate Release, July 29, 2015

US FOMC Interest Rate decision today is the main focus of the week. With the Fed Chief Yellen yet again reiterating that a rate hike should take place in 2015, today’s release could provide a heads up IF Feds were to raise interest rate by September. We’ll definitely pay close attention to today’s FOMC statement.

2:00pm US FOMC Interest Rate Forecast 0.25% Previous 0.25% DEVIATION: N/A

Let’s take a look at the prior changes for the last FOMC Statement as our basis for today’s FOMC Statement.


June 17 – FOMC Statement Analysis

Information received since the Federal Open Market Committee met in April suggests that economic activity has been expanding moderately after having changed little during the first quarter [revised from “economic growth slowed during the winter months, in part reflecting transitory factors”]. The pace of job gains picked up [revised from “pace of job gains moderated”] while the unemployment rate remained steady. On balance, a range of labor market indicators suggests that underutilization of labor resources diminished somewhat [revised from “A range of labor market indicators suggests that underutilization of labor resources was little changed.”]. Growth in household spending has been moderate and the housing sector has shown some improvement; however, business fixed investment and net exports stayed soft [revised from “Growth in household spending declined; households’ real incomes rose strongly, partly reflecting earlier declines in energy prices, and consumer sentiment remains high. Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined.”]. Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports; energy prices appear to have stabilized. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.

Here’s what the “Fed Whisperer” said recently July 8, 2015

(US) Fed watcher Hilsenrath (WSJ):

  • Suggests Fed to play wait and see with Sept rate hike
  • Fed seeks better labor market, confidence of inflation prior to rate increase-
  • Says Fed to ‘weigh’ rate cut in Q3 (cites analysis by WSJ)
  • Suggests if the Fed raises rates, while other central banks are easing policy, this could weigh on US growth.
  • Therefore Hilsenrath, being the foremost expert on Fed policies, is rather unsure on what the Fed is going to do in this meeting. We should also play it safe and only take a trade if we get clear signals. So here’s the plan:
  • If Feds confirm September rate hike (or go ahead with rate hike in this meeting): Market will go nuts and we will see a strong USD surge. We will SELL EUR/USD and BUY USD/JPY.
  • If Feds maintain the same tone as last meeting: We’ll sit on the sideline and wait for the market to make its move first…
  • There could be a third scenario where the Feds could ‘weigh’ in on the potential for further easing – highly unlikely – and then we should see a collapse of USD. In this case, we’ll sell USD like crazy and BUY EUR/USD at the very first chance we get.

    0 0 votes
    Notify of
    0 评论
    Inline Feedbacks
    View all comments