The week ahead is somewhat quiet on the economic front, but the FOMC meeting that is due this Wednesday will dominate the news wires. Heading into the meeting, the market expectations are high that the Federal Reserve will hike interest rates by 25 basis points at this week’s meeting. This would mark the first rate hike for this year. Simultaneously, investors will also be looking to the Fed’s dot plot which could signal an additional rate hike this year.
Besides the FOMC meeting, the Bank of England will also be meeting this week. The BoE meeting comes later following the monthly labor market data. With the current Brexit uncertainty alongside the fact that some companies are preparing to move business overseas could potentially impact the jobs numbers.
After the FOMC and BoE in focus we move to the RBNZ, which is also scheduled to meet this week. The central bank meeting is unlikely to move the markets much. The central bank had already signaled that interest rates will remain at the current levels for the foreseeable future and with inflation staying week, there are no grounds for the RBNZ to tweak its language or the overnight cash rate.
Here’s a quick recap of the key economic events due this week.
Markets brace for a rate hike from the Fed
The Federal Reserve will be holding its monetary policy meeting this week on Wednesday. According to the Fed funds futures markets, the markets have priced in a rate hike of 25 basis points which brings the effective rate to 1.50% – 1.75%.
This week’s FOMC meeting will also be the first that will be chaired by the newly appointed governor, Jerome Powell. Powell, not a new comer to the Fed and was already part of the FOMC under Yellen’s leadership is expected to maintain a steady course.
This was evident from the fact that Powell sounded optimistic when giving his testimony to the U.S. Congress few weeks ago. The uptick in the U.S. economy was seen as a positive for the Fed which is expected to stick to three rate hikes until now. While some market watchers have been speculating that the Fed could pencil in a fourth rate hike this year, the recent payrolls report suggested that the U.S. economy was not close to overheating.
