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The Federal Reserve Press Conference

This afternoon, after the conclusion of the two-day meeting, the Federal Open Market Committee will present its latest monetary policy decision.

In addition to the customary release the statement will be supplemented with the future economic projections for the next two years.

The biggest question, the answer to which the investors are looking for, is whatever the word “patient” is going to be dropped from the Fed lexicology. Will the interest rates be lifted by the June or will this word be replaced by some other synonym?

Notwithstanding that the three monetary easing programs introduced by the United States Government in recent years, have finally brought the results, the dilemma is still there.

We can see the U.S. economy as significantly strengthened, unemployment figures much lowered and jobs market revived so the next logical step is supposed to lead to the interest rate increase.

There are some significant impediments to that however. Despite of all the economic improvement and growth, the consumer spending is still weak and inflation rate is still far away from the much desired 2% target. Falling oil prices are contributing to that factor significantly , whenever it is temporary or not. Higher interest rate will curb the spending even further.

The question is if Federal Reserve can afford the rate hike if problems with inflation still exist.

There are some fears of the effect of the raising interest rate will cause instability in the weak global economy. Such volatility might come back and have a negative effect back on the U.S. economy.

Already very strong dollar is playing a further detrimental effect to more flexibility in the Federal Reserve language, even though it is portrayed as an indicator to the country’s economic strength and not as the threat to the economy. The U.S. stock market is making the new highs along with the U.S. currency.

It has been long speculated that in case all data complies, the rate increase shall be made by June, or September the latest.

As it looks, the question might be finally not if the “patience” is going to be removed, but how long it can be delayed to

Wednesday, 18 Mar, 2015 / 1:57

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Source : http://academy.acfx.com/market-briefing-new-york-open-18-03-2015/

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