U.S. Federal Reserve policymakers begin a two-day meeting on Tuesday, October 31st. No major surprises are expected from November’s meeting likely having a minimal impact on the financial markets. According to the CME Group FedWatch Tool, there is only a 2% probability of a November rate hike, while December’s probability is a near certainty at 98%.
Investors will be looking for hawkish comments from Fed Chair Janet Yellen to justify an end of year hike. Key performance indicators to monitor are overall GDP growth, inflation and PCE price index. With inflation remaining under the Fed’s 2% target, some policymakers may be apprehensive to bump Q4 rates until the objective is achieved.
While investors will pay close attention to the FOMC, all eyes will be on U.S. President Donald Trump as he is expected to announce his choice for the next Chair of the U.S. Federal Reserve on Thursday. Multiple news outlets report that Federal Reserve Governor Jerome Powell is likely to get the nomination.
Additionally, markets may remain in a holding pattern until the much-anticipated Republican tax bill is possibly announced on Wednesday. As House Republicans hope to have the bill passed by the end of the year, closely monitoring the implications and timeline of the proposed bill will be imperative as details emerge.
Regardless of market sentiment around FOMC meetings, trading during pivotal news events can potentially trigger spikes in volatility. Thus, properly managing risk/reward is paramount.
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