It will be the hottest week of September, with four central banks’ meetings, five PMI releases, and a lot to trade.
Here’s what major banks expect from Fed
Traders are waiting for the Fed statement at 21:00 MT time. The market reaction depends on how far their expectations will meet the Jerome Powell’s speech. The main interest will be the Fed’s vision for the future economy growth, prices and other projections. You’ll find below what major banks think will happen this evening.
Last Friday the TD Securities’ analysts were so right about the NFP data. They anticipated 3 million jobs losses, when it turned out 2.89. Very impressive! Who knows, maybe this time they will be so close again. The TDS doesn’t forecast any new policy announcements, but they think the tone of the speech will be quite dovish and inflation may fall below 2%. More hawkish than expected would be good for USD.
Analysts at the Rabobank expect that the Fed won’t turn rates negative, but the yield curve control may be discussed as an option for the future to stimulate the economy. Under yield curve control, the Fed would target some longer-term rate and promise to buy some amount of long-term bonds to keep the rate from increasing above its target. According to Rabobank, “at the press conference markets will be particularly interested in the segments of the curve that the Fed has in mind for control”.
Strategists at the Deutsche Bank predict that Jerome Powell, the head of the Fed, will focus more this evening on the further support of the economic recovery. They believe Powell may leave the amount of further asset purchases open between $65 billion and $85 billion. Also, they anticipate that rates will stay lower for longer.
Economists at the CIBC believe the Fed won’t set negative rates, but that likely leaves either an increase in the size of the Fed's bond-buying program or a move towards yield-curve control. Also, they think that the speech will be more dovish than the prevailing market sentiment.
According to the ING, the Fed won’t change rates and leave them at 0-0.25% and may not offer much new forward guidance. Analysts at ING believe that the Fed will continue the purchases as always ‘in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions’.
Keep an eye on the Fed statement today and catch the market movement!
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