Fed Interest Rate Decision (January 2019)


Posted on: 2019-01-30 (Day) By BCR Market Event


 

The Fed lifted its interest rate from 2.25% to 2.5% as widely expected during the meeting in December 2018. The FOMC said the labour market has continued to strengthen, the economy is strong, and inflation is near the 2% target. The most important thing was the Fed has projected two 25 BPs increases in 2019.

U.S. Interest Rate (%)

 

U.S. Interest Rate Announcement History

Date (GMT)                                       Previous              Consensus          Actual

30 Jan 2019                                       2.5%                    2.5%

19 Dec 2018                                      2.25%                  2.5%                    2.5%

08 Nov 2018                                      2.25%                  2.25%                 2.25%

26 Sep 2018                                      2%                        2.25%                  2.25%  

01 Aug 2018                                      2%                        2%                       2%

13 Jun 2018                                       1.75%                  2%                       2%

02 May 2018                                     1.75%                  1.75%                  1.75%

21 Mar 2018                                     1.5%                    1.75%                  1.75%

31 Jan 2018                                       1.5%                    1.5%                    1.5%

13 Dec 2017                                      1.25%                  1.5%                    1.5%

 

 

Opportunities can be found in the statement

 

Inflation Rate

The U.S. annual inflation rate fell to 1.9% in December of 2018 from 2.2% in the prior month, matching market expectations. The inflation rate hits a 16-month low. A moderate slowdown can be found in the figure. However, it remains relatively high in the last few years.

U.S. Inflation Rate (%)

 

Jobs Report

Total nonfarm payroll employment expanded further in November, and job gains were strong, on average, over recent months. The national unemployment rate remained at a very low level of 3.7 percent, and both the labor force participation rate and the employment-to-population ratio also stayed flat in November.” Referring to Fed’s Monetary Policy Report.

A worse-than-expected jobless rate in the U.S. rose to 3.9% in December 2018 from a 49-year low of 3.7% in the previous month. However, wages moved to their highest annual gains at 3.2% since the recession at the end of 2018, a rate that will move higher as labour shortages pressure employers.

U.S. Unemployment Rate (%)

 

GDP

The annual GDP growth in the U.S. expanded 3% in the Q3 2018, the data is formed an upward trend since Q2 2016. With a strong job market, inflation close to the objective and bulk growth of GDP, “FOMC believes that the best way forward is to keep gradually raising the federal funds rate”. 

U.S. GDP Annual Growth Rate (%)

 

Technical View

The Dollar Index (DXY) is consolidating in a range between 94.62-96.64 during this month. In the daily timeframe, indicators are remaining in bearish stance for both MACD and RSI. The 50-DMA and 100-DMA are narrowing to show the potential reversal of the long order, the price is moving below the MA system, these are showing the weakness of the dollar index in the short run. However, the price is remaining in the upward channel as shown in the figure below. Focus on 94.62 support level which is the pivot level in the long term.

USD Index D1 Chart