What Should We Know Before the FED Meeting?

What Should We Know Before the FED Meeting? What should we know before the FED meeting? In what ways are the decisions of the US Federal Reserve (FED) important? The FED meeting, which global markets are eagerly awaiting and carefully monitoring, will take place. US Federal Reserve (Fed) decisions in the meeting will be announced at 10 pm. Fed President Jerome Powell and other officials raise the issue of asset purchases to support growth as the coronavirus outbreak worsens. It is almost certain that the Federal Open Market Committee (FOMC) will keep the overnight interest target range which it pulled to 0 - 0.25 percent range on March 15.   FED May Adopt Verbal Guidance Some economists think that the FED may adopt a new verbal referral in asset purchases of $ 120 billion per month. Questions such as how long the purchases will take to support full employment and 2 percent inflation targets are expected to be answered. Accordingly, the guidance to be made by the FED already seems to be a stronger promise than the promise that “purchases will continue in the coming months.” The markets have prepared themselves for a possible change since the November FOMC meeting showed that the authorities will make the announcement for the asset purchase program "fairly soon". To this end, "FED's powerful tool is the perception that they are there." Grant Thornton chief economist Diane Swonk stated that the biggest disappointment would be somehow the lack of verbal guidance in asset purchases. Economists who took part in the Bloomberg survey also expect the new referral to come at this meeting, with a small majority. However, it is stated that other changes such as changing the scale of purchases are less possible. About two-thirds of economists think FOMC will extend the average maturity of bond purchases before the end of 2021. Only 23 percent of the survey respondents said they expect this step to be taken in the coming weeks. Bob Eisenbeis, vice president of Cumberland Advisors and a former Atlanta Fed official, commented on the issue: “If there is a need for more incentives, they will have a clearer view in January or February. I am not sure they will successfully communicate why shifting maturities, when rates are so low, will gain something in the employment or inflation target.”   How Do Possible Decisions Affect the Market? It is stated that the possible decisions to be taken regarding asset purchases may affect the transactions in US Treasury bonds. In addition, it is said that not extending the maturity or not increasing the purchases in Treasury bond purchases may cause the 10-year interest rates to increase to 1 percent or exceed this level. Since the end of March, the 10-year yield has hovered between 0.5 percent and just below 1 percent, the August low. In the first days of December, this limit was almost exceeded. The lifeless employment report raised hopes that the government would increase spending as the number of cases increased in the coronavirus. Authorities expect interest rates to remain close to zero until 2023. This confirms Powell's signal that tightening will be delayed until the average inflation target of 2 percent is reached, with repeated times at every opportunity. In September, 4 of the 17 FOMC participants expected an interest rate hike until 2023.     This article is contributed by Bloomberg and Bloomberg HT.