We expect the Fed to maintain the Fed funds target range at 1.00-1.25%.
This is one of the small meetings without updated projections or a press conference and we do not expect the Fed to send any new signals by making major changes to the statement. We expect the Fed to reiterate that it is monitoring inflation 'closely'.
We still expect the Fed to hike in December (in line with market pricing), as Fed Chair Janet Yellen recently reiterated her faith in the Phillips curve mechanism working its way through to inflation.
We currently expect two hikes in 2018. However, uncertainty about monetary policy next year is particularly high, as the Fed will undergo big changes in terms of voting FOMC members, not least as Donald Trump is likely to replace Yellen.
USD crosses should continue to be supported near term by the Fed's willingness to move on with a December hike but we maintain our view that the ECB's willingness to take tapering to the next level should ensure that EUR/USD bottoms out around the current level.
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