Fed should leave all the monetary policy measures unchanged today: Fed funds rate should stay unchanged at 0-0.25% and asset purchases at USD120B per month. The focus of the meeting will be on the adjustment of the forward guidance about the asset purchase program. It will be a qualitative, outcome-based guidance as “most” members favored.
Additionally, the statement will be accompanied by the updated economic projections and median dot plots about the policy rate outlook. For the former, thanks to the vaccine news, the Fed might upgrade GDP growth and inflation forecasts for 2021. We expect the majority of members would project no rate hike until end-2023. Yet, it is possible that more members would anticipate an increase before that, when compared with the last projections.
Some previews here:
- FOMC Preview – Fed to Update Forward Guidance on QE
- Fed Likely to Skip QE Boost, May Adjust Composition and Forward Guidance
- FOMC Meeting Preview: Threading A Needle
Dollar is generally holding inside last week’s range for now, except against Yen. USD/JPY’s break of 103.51 temporary now put focus to 103.17 support. Decisive break there resume the down trend from 111.71 towards 101.18 low. If that happens, we might also see a break of 1.2177 temporary top in EUR/USD, and 90 psychological level in Dollar index.
