FOMC: No change on Wednesday, a hike in December – BBVA

On Wednesday, the Federal Reserve will announce its decision on monetary policy. According to the Research Department at BBVA, the US central bank will keep rates unchanged at this week meeting and will hike in December.  

Key Quotes:  

“At its November meeting, we expect the Fed to maintain its benchmark rate at 2.0-2.25%. Labour market conditions remain auspicious and inflation remains near the Fed’s 2% target despite a rise in equity market volatility and the drop in prices. In terms of long-term rates, the nontrivial rise over the month will likely be viewed as a positive development by most committee members despite the impact that higher borrowing costs could have on the level of financial accommodation.”

“While Fed communication could incorporate a slightly less hawkish bias, we continue to expect the Fed to raise rates for the fourth time this year at its December meeting. If the correction in asset prices intensifies and the effect of reduced financial accommodation extends beyond financial markets, we could see the committee contemplating a slightly less aggressive normalization path.”