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FOMC decision on Aug.1- What to Expect?

31-July-2018

The US Federal Reserve will conclude its two day meeting on August 1 and a decision is scheduled at 2330 IST.

The US central bank is expected to keep interest rate unchanged at 1.75-2% and this has been factored in.

Focus will be on Fed’s statement for cues about future policy stance. Fed, at its last meeting, indicated possibility of two more rate hikes. Market players are now expecting rate hikes at Fed meeting in September and December.

Optimism about US economy is still high despite trade war worries and concerns about inverting yield curve. This indicates higher possibility that Fed may reiterate optimism about US economy and support for gradual rate hikes.

If Fed reiterates optimism about US economy and support for rate hikes it will be generally positive for US dollar.

However, trend in US dollar will also be Bank of England interest rate decision Thursday and US non-farm payrolls data due Friday. BOE is expected to raise interest rate by 0.25% but focus is largely on future stance.

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