Kjetil Olsen, Research Analyst at Nordea Markets, suggests that today FOMC is likely to keep rates unchanged before another hike in December, but the statement will be closely watched for signs of sensitivity to the decline in the stock market.
Key Quotes
“Changes to the communication are set to be modest however.”
“After the third rate hike of the year in September, the November FOMC meeting is set to be uneventful and be used to set the stage for a fourth hike in December. The FOMC is universally expected to remain on hold and there will neither a press conference nor new forecasts, so all focus will be on the post-meeting statement. There is one question everyone wants an answer to: is the Fed starting to worry about the sell-off in the stock market?”
“We don’t think the decline in the stock market we have seen so far is anywhere close to make the Fed change course. Economic activity and job gains is still very strong. GDP came in at 3.5% q/q annualised in Q3, higher than expected, and unemployment has reached a 50 year low since the September meeting.”
“With such a background, we think the Fed will be hesitant of sending dovish signals by putting additional emphasis on financial developments and don’t expect major changes to the language in the statement.”
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