What to expect from FOMC meet?

Federal Reserve’s two-day policy meet comes to an end today with the release of a statement at 2 pm Eastern Time. FOMC in its meet is likely to hold on to rates and signal its intent for a December rate hike.

In the previous meet held in September, Janet Yellen has indicated that ‘the case for an increase in the federal funds rate has strengthened’. While the Fed opted to keep its main interest rate unchanged at between 0.25%-0.5%, the voice however grew only higher for an increase in interest rate.

Data points towards a more stable economy in recent months with improvement in the labour market, and puts the Fed firmly on course to hike rates before the end of the year. Inflation in the US has also shown encouraging signs as it nears Fed’s target of 2 %.

It is possible that the Fed could decide to hike rates at its November meeting on Wednesday itself; we think that the central bank is much more likely to hold off until December given Presidential Election on November 8 before hiking rates for only the second time in a decade.

Global equity markets have already penciled in a December rate hike, however markets would be closely reading between the lines when Janet Yellen comes out with an official statement.