BUZZ-COMMENT-Fed dot plots will be the focus for traders

Reuters · 09/15/2023 11:03
BUZZ-COMMENT-Fed dot plots will be the focus for traders

- The Federal Reserve is due to announce its latest rate decision on Thursday. In light of the rhetoric from policymakers in the lead up to the meeting, expectations are for the bank to stand pat on policy. That said, with U.S. data remaining firm, the focus is likely to be on the dot plot projections, given the rate cuts priced in by the end of 2024.

It is worth that, Fed Chair Jerome Powell has previously played down the importance of the dot plots in signalling where policy rates will end up. This was particularly evident in 2022, where the Fed raised rates by 425bps, compared to the 75bps projected in the December 2021 dot plots.

However, the dot plots will guide markets towards the path of least resistance, thus for traders.

Currently, the 2024 median dot plot projection is 4.6%, meanwhile, which is roughly in line with market pricing FEDWATCH. In turn, with U.S. data remaining robust and oil prices at yearly highs, risks are geared towards an upgrade in the 2024 dot plot to 4.9% from 4.6%. That would therefore prompt rate cuts to be priced out, which by extension would likely provide support for the USD.

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(Justin McQueen is a Reuters market analyst. The views expressed are his own. Editing by Alison Williams)