The result of Last FOMC meeting offered more time to investors and financial market to get well prepared for interest hike this year. The reason that Fed held the interest rate unchanged was basically the concerns from labor report and Brexit. The June statement noted that “the pace of improvement in the labor market has slowed” and “job gains have diminished,” but that was before a Labor Department report, released July 8, showed employers added 287,000 workers to payrolls in June following net job creation of just 11,000 in May.
The statement released tomorrow will specifically measure those questions and discussions.
Labor market, Global growth and US economy, Inflation
However, the dovish and hawkish were competing on the decision. The committee is divided between those who believe rates need to be increased this year — and maybe more than once — to reflect momentum in U.S. growth, and those who believe “neutral” rates are so low that risk-management considerations dictate a more cautious approach, Wright said.
The neutral rate of interest is the level that neither spurs nor slows the economy. The FOMC has already lowered its estimate of where the long-run rate lies to 3 percent in its June quarterly forecast from 3.75 percent a year earlier. Some officials say it could be even lower.
While various regional Fed presidents have weighed in on the policy debate in recent weeks, Yellen has not spoken publicly since the June 15 FOMC press conference. Her next public speech is on Aug. 26, at the Kansas City Fed’s annual policy retreat in Jackson Hole, Wyoming.
Prices of futures contracts linked to the benchmark federal funds rate suggest the chances of a September hike are roughly one in four.
Basically, one body is considering a rate hike this time. But the FOMC meeting statement tomorrow will be so important since the earning season this quarter is quite disappointed. Investors will seek for a safe place to put the capital if they see no benefits from holding the treasury bonds. Gold usually will be one of the choices and also JPY got strengthened recently. Here, we see a trend of money flow into a better choice in case the Fed states bad outlook for US economy.