FOMC, Federal Reserve Talking Points:
- Today brought the first rate decision out of the FOMC in 2022.
- The bank was widely-expected to hold rates flat today while opening the door for a hike in March. But, perhaps more important is what the FOMC says about their expectations for the rest of the year as they look to temper inflation. Will the start to open the door to Quantitative Tightening? Or perhaps a 50 basis point move in March?
- Today’s meeting is not a quarterly rate decision which means no updated forecasts and projections. This puts considerable focus on the press conference starting at 2:30 PM ET.
- This is a live article, meaning that it will be updated as developments take place, with time stamps for each update as we navigate the rate decision and press conference. The updates will post in reverse-chronological fashion, with the newer updates showing at top, and older updates below.
2:00 PM
The Federal Reserve held rates flat at today’s rate decision, as was widely-expected. But, today’s meeting never really was about a January hike. Instead, the focus is on the inevitable shift at the FOMC as the bank moves into a posture of tightening and hiking rates in the remainder of 2022 trade. And while markets seemed to receive the initial hawkish messages without much fear in Q4 of 2021, more recently pressures have begun to mount in equities as there’s been a fear that the Fed is behind the ball on inflation and may need to get much more hawkish at some point this year.
So, the question is just how hawkish will the Fed be? Rates markets have started to really run with that projection with the expectation of as many as five or six hikes in 2022. The median expectation ahead of the January rate decision was for four hikes in 2022, with each likely to be expected around the quarterly rate decisions at which the FOMC could provide updated projections for each 25 basis point move.
While it may sound nonsensical to talk about five or six or even four rate hikes before the Fed has even done one, markets are constantly forward-looking and the aggressiveness with which the Fed tightens policy has become of significant importance to risk markets around-the-world.
At DailyFX, we’ve already produced a plethora of content on the matter ahead of the rate decision.
Christopher Vecchio’s FOMC Preview
Chief Strategist John Kicklighter and IG CEO Pete Mulmat spoke earlier on the day to talk about possibilities around today’s rate decision.
I had looked into the matter in my US Dollar Price Action Setups webinar yesterday afternoon.
Mr. David Song took a look at the Australian Dollar and an interesting technical dynamic around the January opening range in the AUD/USD pair, with focus on FOMC ahead of the event.
Mr. Michael Boutros looked at Gold earlier in the day, a few hours ahead of the FOMC with eyes on breakout potential in the yellow metal.
In a somewhat related item, the Bank of Canada hosted an interest rate decision earlier in the day and while markets were highly-expecting a rate hike, the BoC chose to leave rates flat. Richard Snow covered this for the team.
— Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
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