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FOMC – a look ahead

19/12/2018

Today at 19:00 GMT the Federal Reserve Bank are expected to announce a 25 basis point (0.25%) rise in the Federal Funds Target Rate (FFTR) to 2.25 -2.50 % in its final meeting for the year. President Trump has been noticeably critical of US rate increases recently, and this anticipated rise will send the dual messages of comfort to the Equity markets and those who are concerned that the Fed might be susceptible to political pressures.  Looking forward to 2019, it is now expected that there will be further increases, but these will be similarly modest, with the consensus view that interest rates will be around 3.0 -3.125 % by the end of Q3. Particular interest will be paid to the tone and wording of the statement of Chairman Powell. The Fed is hoping to soothe the nervous equity markets and restore a little confidence, although we feel that it will be some time, and require slightly more weighty evidence before that happens. We believe the market has entered a bearish consolidation phase, which will amply any negative news and tone down the positive. The end of the year is traditionally a fairly muted, low-volume period, and the lack of liquidity can sometimes make for some odd pricing, so monitor your Stops carefully if you plan to maintain exposure during this period.

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