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Market Awaits FOMC Statements for Hints at Future Rate Hikes

Published February 1, 2017
  • The Federal Reserve Open Market Committee (FOMC) will release its monetary policy decision at 2:00 PM EST; the market has priced in that the FOMC will not raise interest rates today
  • Investors will study the FOMC statement intensely for any change in tone that could indicate potential rate hikes in March, May, and June; odds of a rate hike as of this morning stand at – March 24.4%, May 35.1%, and June 46%
  • The FOMC is still waiting for complete details on President Trump’s fiscal policies; there is, however, growing evidence that tightening may be necessary even before government stimulus
  • ADP Non-Farm Employment Change showed that the US economy added 246,000 jobs last month, smashing the 165,000 expectation; employment numbers from the US government will be released on Friday at 8:30 AM EST
  • The ISM’s PMI for manufacturing is set to be released at 10:00 AM EST today; a reading above 50 will show the FOMC and the market that the US economy is continuing to expand
  • Euro zone PMI numbers also showed expansionary figures, marking a 69 month high at the start of 2017; positive Chinese PMI numbers showed an expansion near a two-year high, calming fears of a hard landing for the world’s second largest economy
  • Oil is up as investors continue to consider the counter effects of the OPEC oil cut compared with increased US drilling activity; data on US crude oil inventories to be released at 10:30 AM EST

Chart (1) ADP Non-Farm Employment Change January 2016 – Present