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Analysts at ING suggest that the strife in emerging markets is unlikely to deter the Fed as under former Fed Chairs Alan Greenspan, Ben Bernanke or Janet Yellen things may have been different, but the Jay Powell Fed is much more focused on the domestic story.

Key Quotes

“Earlier this year he brushed aside criticism that the Federal Reserve wasn’t thinking enough about the international implications of higher US borrowing costs, saying “the role of US monetary policy is often exaggerated”. We agree that there isn’t a great deal the Federal Reserve can do to address the fundamental challenges facing many of these emerging market economies, but a strong dollar and higher US borrowing costs certainly won’t help their situation.”

“As such we expect the Federal Reserve to continue describing monetary policy as “accommodative”, which will warrant “further gradual increases” in interest rates. The Federal Reserve will also be updating their forecasts, which were last published in June. This could see their GDP prediction nudged a tenth higher, while their so-called “dot diagram” of Fed member views is likely to continue pointing to a December rate rise with a median projection of three more 25 basis point rate increases next year – although with the usual broad spectrum of views within that.”