Despite worries of downside risks, the Fed still expects to raise rates this year!

The Federal Reserve on Thursday released the Minutes of the Federal Open Markets Committee meeting on September 16/17. A summary of economic projections made by Federal Reserve Board members and Reserve Bank presidents for the meeting is also included as an addition to these minutes.

The Fed’s statement focused on 2 points:

1- Outlook of economic activity in the United States:  The U.S. economy has strengthened and the labor underutilization had diminished, economic conditions did not warrant an increase in the target range for the federal funds rate at this meeting. The Fed agreed that developments over the inter meeting period has not materially altered the Committee’s economic outlook. (The rate hike will remain a strong option in the near future).

2- Delay rate hike: The Fed decided not to hike the rate and wait for 2 reasons:

A: The Fed was concerned that hiking rates before inflation hit its 2% target, may affect the U.S economy partially, resulting in hurting the Fed’s credibility.

B: The Fed was also concerned about China’s economic slowdown and potential indirect effect to other countries weighed on the Fed’s decision.

Conclusion: The Fed said that the risks to the US economy were “nearly balanced”, and the economy would likely continue to remain active along just fine, most concerns come from the Chinese economy. As a result; rate hike remains a strong option in the near future.

Market impact: The Fed shows that U.S economy is in a good condition, recovery is likely to continue in the near future, so the US dollar will continue moving sideways with a strong potential to break higher , the weekly chart of the US dollar index supports this view strongly and consistent with the Fed’s outlook.

 

USDINDEX Weekly Oct 09

 

Here are the full Minutes from the Fed:  Minutes of the Federal Open Market Committee

 

MARKET DATA

UPCOMING ECONOMIC EVENTS

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