The Federal Open Market Committee of the US Federal Reserve is scheduled to issue its rate decision to the public tomorrow, Wednesday 30 October 2013. At this time, many experts believe that the FOMC will likely choose to maintain the current rates.
Readers are reminded that this rate can be influential in its effect on consumer loans, and mortgage rates, as well as on bonds. Changes to the rate can lead to appreciations or depreciations in the dollar, and therefore many economists look to this important metric for potential shifts in the value of the currency, as well as over the market as a whole.
Analysts note that many observers will likely be focused on the wording of the statement that will come with the release of the decision in hopes of gaining further insight into the perspective of the committee. With the ongoing speculation surrounding the future of the Fed’s $85 billion quantitative easing measures, questions of whether the financial body will decide to make cuts have many investors on edge. In recent months, traders have been encouraged by statements from sitting Federal Reserve Chairman Ben S. Bernake that as the recovery progressed, then cuts to the stimulus could be in the offing. This helped to boost confidence with investors who began returning to the USD. However, Bernake and the FOMC have placed improvements in the levels of employment as a key factor in their decision. Due to the fact that last month’s report showed a drop in the rate of jobs added to the workforce, some analysts believe that movement on the stimulus may be put off to a later date, potentially upsetting investors. As such, many people will be looking to the language used by the FOMC to gauge what sort of mindset they may be in on moving forward on this matter.
Analysts also note that the Fed will be releasing the figures for the pace of treasury purchases as well as those of mortgage backed securities. These numbers are believed to also have remained unchanged.
Further complicating the FOMC’s path going forward on interest rates is the threat of future debt ceiling debates in Washington which could force the Fed to raise the rate of interest that it is forced to pay on bonds. This is to say that as the bonds become more risky due to the possibility that there could be a government default to bondholders, the Fed would be forced to pay a higher rate in order to maintain them as attractive investments. While analysts do not assess this to be an immediate threat for the time being, it may come into play in the minds of investors as they plan out their investments in the coming months, thus also affecting the value of the dollar.
Analysts believe that since the interest rate is unlikely to change in tomorrow’s announcement, then there is a lower likelihood for any significant changes to the value of the already struggling USD in trading against its rival currencies.
Kiwi Rate Decision to be Announced Wednesday
The Reserve Bank of New Zealand is set to release its own interest rate decision tomorrow 30 October 2013 for the upcoming month. Currently, many experts do not expect any significant changes to the standing rate.
As noted above, this rate can be influential in its effect on consumer loans, and mortgage rates, as well as on bonds. Any shifts made to this rate can thus significantly impact the value of the Kiwi within both the domestic as well as international markets.
Analysts note that the current rate remains high as the central bank attempts to exert its influence on the rates of inflation within the economy, as well as to help push growth for the small island nation. It should be noted that as financial institutions go, the New Zealand Reserve Bank is generally considered to be transparent in its decision making process, thus leading to few surprises when it makes its public announcement. This applies to both its standing, stated goal of maintaining inflation between 1-3%, as well as its metrics for making its decisions on the rates.
At this time, analysts do not expect to see any considerable shifts to the Kiwi in trading stemming from this announcement.
US to Issue CPI for September
The US is expected to release two reports on 30 October 2013 detailing changes to the consumer price index over the previous month of September. Included in this release are two different reports. The first is the standard general CPI report covering shifts in the cost of living for consumers while the second excludes factors such as food and energy.
At this time, many experts believe that the overall CPI may drop slightly. However, when measured on the more stable report that doesn’t measure food and energy prices, the rate is expected to remain the same.
Analysts note that variables such as food and energy are generally fairly volatile as they can shift dramatically according to short term market conditions. This is opposed to factors such as a durable good which is unlikely to change in any significant way over a short time period.
Readers are reminded that the CPI report can help to provide an insight into the current economic conditions of a country, and help to predict the direction that the market there will move.