Federal Reserve to announce its decisions on interest rate and forecasts for the US economy today


Analysts expect the US Fed to maintain its current zero interest rate policy over the next three years, which could put additional pressure on the dollar.

However, if the Fed raises interest rates instead, a rise in dollar demand will be seen in all markets.

“The big highlight of the day will be the rate hike in 2023,” said Greg Anderson, head of currency strategy at BMO Capital Markets.

“We hope the Fed will not raise rates until then because if they increase, stocks and commodities will be sold, which will result in a sharp increase in the US dollar,” he added.

Meanwhile, Fawad Razaqzada of ThinkMarkets said that “the US Fed will try to avoid the uncertainty that the US presidential election will bring, so it is not going to create unnecessary turmoil in the financial markets,”

In another note, the United States may successfully emerge from the economic hole dug by the coronavirus pandemic. But if not, it would try its best to close the remaining $ 2 trillion gap in GDP, while the health crisis and chronic unemployment will continue.

Such an uncertainty left a huge split in forecasting.

Any recovery in GDP may not match the labor market, leaving millions of unemployed Americans feeling no recovery at all, even if growth is outstripping.

An example of this is the recession in 1990, during which jobs have recovered much more slowly than GDP. Now, with millions of unemployed in vulnerable industries such as tourism and hospitality, as well as changes in the way trade is organized after the quarantine, it may take even longer for excluded workers to find a new foothold.

Recovery right now is clearly different. The creation of more than 10 million jobs in the economy over the past four months has surprised many policymakers. An 8.4% unemployment rate in August is already below the median expectations of Fed officials. Nonetheless, the Fed will forecast today whether these rates of improvement will continue.

The material has been provided by InstaForex Company – www.instaforex.com