- The minutes of the Fed Monetary Policy Meeting of January 28-29 will be published on Wednesday.
- Details about discussions about the decision to keep policy adjustments without changes will be analyzed by investors.
- The markets see practically null the possibility of a 25 basic points cut by the Fed in March.
The minutes of the monetary policy meeting of the Federal Reserve of the United States (FED) of January 28-29 will be published on Wednesday at 7:00 p.m. GMT. The policy managers decided to maintain the policy rate in the range of 4.25% -4.5% at the first 2025 meeting. However, the Central Bank eliminated the previous language that suggested that inflation had “advanced” towards its objective of 2 %, stating instead that the price increase rhythm “remains high.”
Jerome Powell and his team decided to keep the monetary policy settings without changes after the January meeting
The Federal Open Market Committee (FOMC) voted unanimously to maintain the policy rate without changes. The statement showed that the officials expressed confidence that the progress in the reduction of inflation probably will resume later this year, but emphasized the need to pause and expect more data to confirm this perspective.
At the press conference after the meeting, the president of the FED, Jerome Powell, reiterated that they do not need to hurry to make adjustments in the policy.
Commenting on the policy perspective earlier, the president of the Fed of Philadelphia, Patrick Harker, said the current economy advocates a stable policy for now. Similarly, the president of the Fed of Atlanta, Raphael Bostic, said that the need for patience suggests that the next rate cut could happen later to give more time to the information.
When will the FOMC minutes be published and how could the US dollar affect?
The FOMC will publish the minutes of the policy meeting on January 28-29 at 7:00 p.m. GMT on Wednesday. Investors will examine discussions around the policy perspective.
In the event that the publication shows that those responsible for policies are willing to wait until the second half of the year before reconsidering rates cuts, the immediate reaction could help the US dollar (USD) gain strength in front of their rivals. On the other hand, the market reaction could remain contained and be ephemeral if the document repeats that officials will adopt a patient approach to a greater relief of politics without providing new clues about the moment.
According to the CME Fedwatch tool, markets currently see the possibility of a 25 basic points in March. In addition, they value by more than 80% the probability of maintaining politics in May. Therefore, market positioning suggests that the publication would need to offer a clearly hard line language to provide constant impulse to the USD.
Eren Sengezer, leading analyst of the European session at FXSTERET, shares a brief perspective for the USD index:
“The indicator of the Relative Force Index (RSI) in the daily chart is maintained well below 50 and the index remains below the simple mobile average (SMA) of 20 days, highlighting a low -term bearish trend.”
“Down, 106.30-106.00 Align as a key support zone, where the 100-day SMA and the 38.2% of the upward trend from October 2024 to January 2025 are located. If this area of Failure support, 105.00-104.90 (200-day SMA, 50%fibonacci setback) could be established as the following objective bassist.
US interest rates
Financial institutions charge interest rates on loans to borrowers and pay them as interest to savers and depositors. They influence the basic types of interest, which are set by central banks based on the evolution of the economy. Normally, central banks have the mandate to guarantee the stability of prices, which in most cases means setting as an objective an underlying inflation rate around 2%.
If inflation falls below the objective, the Central Bank can cut the basic types of interest, in order to stimulate credit and boost the economy. If inflation increases substantially above 2%, the Central Bank usually rises the interest rates of basic loans to try to reduce inflation.
In general, higher interest rates contribute to reinforce the currency of a country, since they make it a more attractive place for world investors to park their money.
The highest interest rates influence the price of gold because they increase the opportunity cost of maintaining gold instead of investing in an asset that accrues interest or depositing effective in the bank.
If interest rates are high, the price of the US dollar (USD) usually rises and, as gold quotes in dollars, the price of low gold.
The federal funds rate is the type to a day that US banks lend each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set at a fork, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the aforementioned figure.
Market expectations on the interest rate of the Federal Reserve funds are followed by the Fedwatch of the CME tool, which determines the behavior of many financial markets in the forecast of future monetary policy decisions of the Federal Reserve.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
