Are the Federal Reserve ready to resume tightening?

All eyes fall on this Thursday’s Federal Open Market Committee meeting at 05:00 AEST and Janet Yellen’s press conference 30 minutes later.

Janet Yellen
Source: Bloomberg

The meeting could set the stage for risk appetite over the coming months, as much of the upside in risk assets since 11 February has been premised on subdued pricing around future moves from the Federal Reserve. If we look at the Fed’s mandate (price and asset stability, and full employment), one could make an argument that they could lift rates as soon as this meeting. However, with a mere 4% probability of hike priced into markets for this meeting, one suspects if they do decide to lift rates it would cause the USD to spike and equities to sell-off aggressively. This is a fate the Fed will be keen to avoid.

In this video, Chris Weston looks at what’s likely to be announced and the potential reaction in the markets. The importance of this meeting should not be underestimated and if the Fed are too hawkish, it has the potential to affect market sentiment.

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