FOMC Preview
November 1, 2017
A press conference is not scheduled for after the release of today’s FOMC statement, set for 14:00 EDT (18:00 GMT). By a unanimous vote , the federal funds target range of 1-1.25% was maintained at the last FOMC meeting on September 20. Nor is a change expected at this week’s meeting, but the statement will include nothing to quell widespread expectations that December’s meeting will enact the third 25-basis point increase of 2017. The two earlier moves were made in March and June, and increases also occurred at the December meetings of 2015 and 2016.
The statement in September warned of possible short-term disruption from a trio of hurricanes, but hard U.S. data such as 3.0% GDP growth in 3Q fail to show this. In addition to strong growth, financial markets have strengthened. Since the September meeting, the dollar has risen 3.3% against the euro and 2.3% versus the yen. The 10-year Treasury yield has risen a dozen basis points, and short maturities have climbed even faster. The DOW has leaped over 1,000 points (4.9%), fueling plenty of talk that the market may be in a bubble. West Texas Intermediate crude oil has climbed about 8% and is higher than its level at any prior FOMC meeting since the one in June 2015.
WE RECOMMEND THE VIDEO: Ray Dalio: Yuan Will be a Reserve Currency Faster Than Expected
Nov.02 -- Bridgewater Associates founder Ray Dalio explains the path he sees for the yuan to become a reserve currency faster than current expectations.
As of last month, the Federal Reserve began the task of reducing the size of its balance sheet by not quite rolling over the entire amount of its maturing securities acquired through quantitative stimulus. Rollovers per month are now limited to portions exceeding $6 billion of Treasuries and $4 billion of mortgage-backed securities. While Fed officials declined to call this practice an active monetary policy tool, it has enormous symbolic importance and foreshadows a continuing gradual normalization of the federal funds target.