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A Day Prior to the “Big Day”

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All eyes will be focused on the FOMC outcome in which a 50 bp rise is fully priced. Hence, attention will be on the dots and what they imply about the rate trajectory, as well as the tone in Chair Powell’s press conference and then the GDP, unemployment rate, and PCE chain price projections for clues on the policy trajectory.

Powell has already indicated that the forecasts for the funds rate will be revised up. It is important to know how many and how much. Powell suggested that some dots could see upward revisions of 5% handles. We also expect a shift from uberhawk. Bullard A minimum of 5% handle in 2023 and possibly from the hawkish Waller too. It is interesting that CPI was released today, just one day before the policy decision. This means that another below consensus report could support both the moderates and the doves.

The CPI is to be expected After October’s increases of 0.4% to 0.3%, November saw gains of 0.3% and 0.3% in the headline. CPI gasoline prices are expected to drop -2% to slow the headline pace. A Absorbing upward pressure As disruptions to global supply chains and the war in Ukraine subside, it is expected that core prices will rise into 2023. As-expected monthly…



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