Fed Interest Rate Decision (December 2018)


Posted on: 2018-12-19 (Day) By BCR Market Event


 

4 Rate Hikes In 2018, How Many In 2019?

The Fed lifted its interest rate from 2% to 2.25% as widely expected during the meeting in September 2018. The FOMC said the labour market has continued to strengthen, the economy is strong, and inflation is near the 2% target. Policymakers are seeing one more rate hike in this year. There is no doubt to have a rate hike in Thursday’s meeting, which is the last rate decision in 2018.

(U.S. Interest Rate %)

 

U.S. Interest Rate Announcement History

Date (GMT)                                       Previous              Consensus          Actual

19 Dec 2018                                      2.25%                  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%

01 Nov 2017                                      1.25%                  1.25%                  1.25%     

 

 

Opportunities can be found in the statement

 

Inflation Rate

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.” Referring to Fed’s Monetary Policy Report.

The U.S. annual inflation rate fell to 2.2% in November of 2018 from 2.5% in the prior month, matching market expectations. A moderate slowdown can be found in the figure. However, it remains relatively high in the last few years. Therefore, there is likely to have one more rate hike in the last rate decision of 2018.

(U.S. Inflation Rate %)

 

 

Unemployment Rate & GDP Growth

Information received since the Federal Open Market Committee met in August indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low.” Referring to Fed’s Monetary Policy Report.

The jobless rate in the U.S. remained at 3.7% in November 2018. Unchanged from the prior month’s 49-year low with market expectation. 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 a bulk growth of GDP, “FOMC believes that the best way forward is to keep gradually raising the federal funds rate”. 

(U.S. Unemployment Rate %)

 

(U.S. Annual GDP Growth Rate %)

 

 

Technical View

The Dollar Index (DXY) is consolidating in a range between 96.29 to 97.53 since early November. The price continues testing 96.29 support level on Tuesday. In the daily timeframe, indicators are losing their bullish momentum for both MACD and RSI. However, the 50-DMA and 100-DMA are remaining in the long order as the price is moving in the upward trend. Focus on 96.29 first support level for the potential reversal of the long order.

($USD Daily Chart)