The November meeting of the U.S. Fed’s Open Market Committee (FOMC) was expected to keep the federal funds rate range unchanged at 1.00% to 1.25% and to do little else. The decision to leave the rate “came and went with little fanfare” as Westpac economist Elliott Clarke put it as he said markets “had already priced in a December rate hike, and the result of this meeting did not argue against that view.”
ANZ Head of FX strategy, Daniel Been agreed. He said the statement which was released after the meeting flagged another rate rise from the Fed at its December meeting. “Overall, the statement is likely to be seen as providing the all clear for a rate hike next month, although the market was effectively all on board with that view anyway, with a hike around 80% priced ahead of today’s statement.”
Economists in general pointed to a subtle change of language in the statement. As Clarke noted, “The most salient change in the decision statement is arguably the upgrading of the growth view”. The Fed statement referred to economic activity as “rising at a solid rate despite hurricane-related disruptions” rather than the previous statement’s description of “rising moderately so far this year”.