The US Federal Reserve will announce the latest decision about interest rate in the morning of September 27 (Beijing time). It is widely predicted that the Fed will raise the interest rate by another 25 basis points. As a result, the US dollar is expected to rise moderately in the future.
According to the minutes of regular meeting on monetary policy by the Fed in August, the Fed is likely to further raise the interest rate if economic data continues to show good performance in the future. The latest decision on interest rate will be unveiled in the morning of September 27. Besides, the Fed will release abstract of economic outlook.
ASA Securities Limited predicted that the Fed will raise the benchmark interest rate by 25 basis points to 2-2.25 percent. The upcoming economic data is very likely to support the valuation about robust economic growth, which was made at the policy meeting in August. Resulting from tax reduction and optimistic economic outlook, consumer spending and commercial equipment investment will maintain stable growth.
The company added that Richard Clarida, vice chairman at the Federal Open Market Committee (FOMC), who took the oath of office last week, is going to attend his first policy meeting. Richard Clarida previously indicated that he inclined to adopt balanced measures in terms of raising interest rate, which was similar to the speeches recently made by Jerome Powell at the annual global central banks’ conference at Jackson Hole. This means that Richard Clarida is likely to support the current gradual route for monetary policy normalization.
JPMorgan Chase economist Michael Ferroli said that the most noteworthy change in the Fed's interest rate statement is whether it refers to the "loose" policy and whether it further assesses the stimulus or restrictions of the policy. "We expect Fed Chairman Jerome Powell to continue to adopt a defensive strategy and will not express any strong expectations for the economic outlook," he said.
According to CME Group's FedWatch, the interest rate market currently expects probability of the Fed to raise interest rates 92 percent this week.
Marshall Gitler, chief strategist at currency market data provider ACLS Global, and economists at Morgan Stanley believe that the Fed is likely to maintain the current pace of rate hikes.
On such expectation, the US dollar index rises moderately higher. At 14:40 on September 24 Beijing time, the US dollar index reported 94.3367, an increase of 0.11 percent, but it has declined since then. As of press time, it declined over 0.3 percent. "As the Fed raises interest rates, the dollar may strengthen further." Snyth, an economist at Central Florida University, said that this means that the dollar will have higher purchasing power than other currencies.
Despite the expected rise in the US dollar index, Kit Juckes, global strategist at Société Générale, said market sentiment has changed. After the summer, the attention of the foreign exchange market will turn to next year instead of the fourth quarter. He believes that the dollar bulls need to reflect on how the Fed federal funds rate peaks.
Translated by Coral Zhong & Vanessa Chen
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