The Federal Open Market Commission (FOMC) started their two-day meeting yesterday. The meeting’s highlight will be the interest rate decision which will be announced at 1900 (GMT+1).
It is highly expected that the officials will leave rates unchanged at 1.75%. Traders will be waiting for the accompanying statement, which will give them direction on future interest rates. They will look at the language coming from the officials and seek to understand whether they plan more rate hikes and if so, how many.
The meeting comes at an interesting period for the US economy. It comes at a time when the US administration has initiated measures to limit global free trade. The administration has announced plans to place tariffs on steel and aluminum. It has also announced plans to place tariffs from many Chinese goods. All these measures and the anticipation they create will mean more uncertainties for investors.
But, the rhetoric is subsiding. Already, the US has announced several major tariff exceptions. In addition, a top level delegation of US officials has travelled to China to talk with their colleagues. The officials include: Wilbur Ross (commerce secretary), Peter Navarro, Larry Kudlow, Robert Lighthizer, and Steve Mnuchin among others. They hope to convince the Chinese officials to lower the barriers the country has placed on American companies.
It also comes at a time when global tensions are mixed. The US has agreed to meet with the North Koreans. This meeting will be aimed at convincing the rogue state to abandon its nuclear programs. It will come a few weeks after a similar meeting between the North Korean leader and his South Korean counterpart. Reduced tensions in the peninsula will be a good thing for the United States.
On the other hand, in the coming week, the president will have a decision on Iran to make. He will either certify or decertify the Iran deal. This was a deal passed during the Obama administration to prevent Iran from acquiring nuclear weapons. A decertification could make the deal obsolete and lead to increased tensions in the region. Already, the impacts of the tensions have led crude oil to rise to three-year highs.
On a brighter side, the meeting comes a day after the data from the Bureau of Economic Analysis showed that inflation had reached the Fed target of 2%. On Monday, the organization’s data showed that the Personal Consumption Expenditure (PCE) index rose by an annual rate of 2.0%. The core Personal Consumption Expenditure index rose by 1.9%. This index measures the changes in the price of goods and services purchased by consumers for the purpose of consumption.
At the same time, the economy is adding jobs, with many industries facing a significant amount of labor shortage. A week ago, BSFN – a large railroad company – announced that it would offer a $25,000 signing bonus to entry level positions. Other American towns are paying people to move there.