Tomorrow, the Federal Reserve will begin its 2-day meeting. According to the Research Department at BBVA, the central bank will keep its policy unchanged and would continue with its patient stance.
Key Quotes:
“At this week’s FOMC meeting on Wednesday, we expect the Fed to maintain the committee’s current policy stance, reemphasizing its “patience” with respect to interest rates and confirming its plans to end its quantitative tightening program. Moreover, with respect to risk management, we believe the committee will maintain its view that risks are asymmetrically skewed to the downside.”
“The committee will have to address how they are incorporating the nontrivial pivot in the domestic economy and the easing of financial tensions into their outlook for the remainder of the year. Moreover, the strong gains in equity prices and the compression of risks spreads could force the committee to revisit the issue of financial vulnerabilities and overheating in financial markets.”
“Most members believe the economy is at or above potential, and that growth is likely to be close to potential this year. If growth surprised to the upside and there was a nontrivial rise in inflation, inflation expectations or significant increase in wages pressures, the FOMC may begin to reconsider raising rates at the end of the year. This fine-tuning would allow the Fed to get policy rates closer to neutral levels in this normalization cycle.”
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