Article Hero

Markets Are More Interested in What Powell Will Say Than What the Fed Will Do

Miguel A. Rodriguez
Miguel A. Rodriguez
20 September 2023

As the markets are mostly betting that the Fed will keep rates unchanged at today’s meeting, more interest seems to be given to what Jerome Powell will say in his speech after the announcement. Will he provide any hints as to whether the end of the hike cycle has been reached? 

US interest rate decision today

Today the Federal Open Market Committee (FOMC) will meet to decide on interest rates. The market is betting that the federal funds rates will remain steady at this meeting. The question now is what the Fed’s move will be at the next meeting and whether the end of the hike cycle has already been reached or if there is still room for more hikes. Investors will receive more clues about this from Powell’s press conference.  

US energy prices have risen to highest levels since October 2022

Although the overall Consumer Price Index (CPI) has been falling recently, the week's increase in gasoline and energy prices in the US was the largest since October 2022.

The price of crude oil has been steadily rising since the end of June and shows no signs of slowing down. The price of crude oil is more related to supply than demand and the supply side is being heavily influenced by the latest production cuts in Saudi Arabia and Russia.  

US production is also falling. The US Energy Information Administration reported that output from the country’s key shale-producing regions is on course to decline. This would be the third straight month of declines and the lowest level since May.

The Fed’s projections on the future of interest rates are in focus

While few expect another rate hike this week, all eyes will be on whether the Fed's projections support its view that another quarter-point hike to 5.5-5.75% is still in the pipeline.

The futures markets are increasing their bets on Fed rates through 2024 and implied policy rates for the middle to the end of the year have reached cyclical highs.

High or higher interest rates over a long period of time are not favourable for the performance of equity markets.

This unfavourable interest rate scenario has had a negative impact on the North American market stock indices, which have been losing ground all week.

Jerome Powell holds the key to the near future today. 

Oil monthly graph September 20.png

Oil monthly chart, September 20, 2023. Source: CAPEX.com WebTrader.

Key Takeaways

  • FOMC meeting today to decide on interest rates.
  • The federal funds rates are expected to be kept stable.
  • Markets are eager to hear what Powell will say in his speech.
  • US energy prices have risen to the highest levels since October 2022.
  • The price of crude oil has been continuously rising since the end of June.
  • The US Energy Information Administration said output will most likely fall further.
  • The futures markets believe that policy rates for the middle to the end of the year have reached cyclical highs.
  • US stock indices continue to fall this week.  

Related Articles:

Sources: Bloomberg, Reuters

 

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.

Share this article

How did you find this article?

Awful
Ok
Great
Awesome

Read More

Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.