The Federal Open Market Committee starts its final meeting of 2018 on Tuesday where its widely anticipated to increase its benchmark rate by one quarter percentage point marking the 3rd increase this year and 5th since the financial crisis.
According to the CME FedWatch tool there is an 87% chance that rates will increase. The probable increase comes on the heels of a robust jobs report in November where 228K new jobs were added to the labor pool.
During her final meeting as Fed Chair, Janet Yellen will likely acknowledge the state of current labor market as it hovers around 4.1% unemployment. In addition to the labor market and lackluster wage inflation, the Fed must consider the future implications of the $1.5 trillion tax cut plan making its way through Washington.
As next Fed Chairman, Jerome Powell, awaits confirmation, he’ll be faced with a number of policy decisions heading into 2018. With inflation struggling to breach the Fed’s 2% target, Powell will be tested to maintain the delicate balancing act to ensure to economy doesn’t overheat or contract.
Trading during large economic events, such as a FOMC announcement, tend to trigger increased market volatility. Thus, its vial to approach the markets with sound risk/reward measures coupled with protective stops.
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