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Rates to Remain Unchanged Ahead of FOMC Meeting

Federal Reserve

May’s Federal Open Market Committee Meeting concludes today at 2:00 pm et. With the recent run of positive economic data a more hawkish tone can be expected as the Feds demonstrate confidence in inflation growth.

It’s widely expected that central bank will not take any action on interest rates which currently stand at a 1.5-1.75% target. According to the CME Fed Watch Tool, there is a 94% chance that interest rates will remain unchanged. While today’s FOMC meeting may be uneventful, investors will search for clues on the frequency of rate hikes planned for the reminder of the year.

With the Fed’s target of 2% inflation achieved in March, coupled with a roaring labor market, will likely reinforce the expectation of a June rate hike with the possibility of introducing an additional bump in 2018.

Confidence in the U.S. dollar has surged since mid-April putting the greenback in positive territory for the first time in 2018. The dollar faces another test on Friday as the Labor Department releases its non-farm payrolls report & wages data. Barring a notable bump in wage growth, the Fed is expected to stay the course on its gradual pace of monetary policy tightening.

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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