Fed will have the first monetary policy decision after adopting “average inflation targeting”. No policy change is expected. Instead, first focus will be on the tweak in the accompanying statement. The statement should reflect that it seeks to seeking to achieve inflation that averages 2% over time. That is, as Chair Jerome Powell said before, “following periods when inflation has been running below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time”. Secondly, new economic projections should reveal Fed’s view on the outlook of both the economy and the policy rate.
Some suggested readings on Fed:
- FOMC Preview – Policy Incorporating Average Inflation Targeting. New Economic Forecasts and Dot Plots Awaited
- Fed Meeting: Justifying the Paradigm Shift
- FOMC Preview
- Fed Monitor: Forward Guidance Linked To Inflation Outcomes And Faster QE Buying On The Cards
- Powell Announced Dovish Shift to Fed’s Monetary Policy, Targeting Averaging Inflation and shortfall of Maximum Employment
- Powell Announces Changes to Monetary Policy Framework
- Fed’s Average Inflation Target Means Low Rates for Longer
Dollar index’s rebound from 91.74 remains unconvincing so far, lacking follow through momentum. the conditions for a rebound are still there, as fall from 102.99 has likely completed with five waves down to 91.74, on bullish convergence condition in daily MACD. Break of 93.66 resistance (with corresponding break of 1.1754 support in EUR/USD), should push DXY through 55 day EMA to 38.2% retracement of 102.99 to 91.74 at 96.03.
