The Federal Reserve Meeting: A Globally Anticipated Decision

The Federal Reserve Meeting: A Globally Anticipated Decision:
As the Federal Reserve meeting approaches,
The world’s attention is drawn to this pivotal event that shapes the direction of global financial markets.
The Federal Reserve meets regularly to discuss key economic issues and make decisions on monetary policy,
particularly interest rates, making these meetings a focus of global interest.

 

Content

The Importance of the  Meeting

Topics Discussed in the  Meeting

How the Meeting Impacts Markets

Why the World Watches Closely

The Effects of the Decisions

Conclusion

 

 

 

 

The Importance of the Federal Reserve Meeting

The Federal Reserve meeting is of immense significance because it shapes the monetary policy of the world’s largest economy.
This meeting serves as a turning point for global markets,
evaluating the state of the U.S. economy and making decisions that impact inflation rates and economic growth.

Federal Reserve decisions, such as raising or lowering interest rates,
directly affect investments, savings, and borrowing costs for individuals and businesses.
Furthermore, the meeting is a key indicator of global economic strength,
as other economies rely heavily on U.S. policies and the stability of the U.S. dollar.
This makes tracking the Federal Reserve meeting essential for investors and economists alike.

 

 

What Does the Federal Reserve Discuss in Its Meeting?

The Federal Reserve meeting focuses on a comprehensive analysis of both the U.S. and global economies, covering:

Inflation Rates: Assess current inflation levels and determine how to control them in line with economic stability goals.

Labor Market: Discussing unemployment rates and employment levels to evaluate economic strength.

Economic Growth: Analyzing GDP data and forecasting future growth.

Monetary Policy: Making decisions on interest rates or quantitative easing programs to stimulate or restrict economic activity.

 

How Does the Meeting Impact Trading Markets?

Federal Reserve decisions significantly impact financial markets in various ways:

Currency Markets: Interest rate hikes typically strengthen the U.S. dollar, while rate cuts may weaken it.

Stock Markets: Higher interest rates may reduce market liquidity and lead to lower stock prices,
while lower rates encourage stock investment.

Gold Markets: As a safe-haven asset, Gold may see reduced demand during rate hikes as investors favor the dollar.

Bond Markets: Bond yields are directly influenced by the Federal Reserve’s interest rate decisions.

 

 

Why Does the World Watch the Federal Reserve Meeting?

The U.S. Economy at the Core of the Global Economy: As the largest economy globally,
changes in U.S. monetary policy impact other economies.

Global Market Influence: Federal Reserve decisions affect market movements in Europe,
Asia and the Middle East are currencies and commodities tied to the dollar.

Indicator of Global Economic Trends: Investors and other central banks look
to the Federal Reserve’s decisions to understand the general direction of the global economy.

 

What Do Federal Reserve Decisions Impact?

Global Interest Rates: Central banks worldwide often follow the Federal Reserve’s lead in their decisions.

Investment Flows: Decisions influence the direction of global capital flows,
whether towards risky assets like stocks or safe assets like bonds.

Commodity Prices: Dollar value changes affect commodity prices like oil and gold.

Global Companies: Firms relying on dollar-denominated borrowing or trading with the U.S. are influenced by Federal Reserve policies.

 

Conclusion

The Federal Reserve meeting is not just a local event but a critical factor shaping the global economy.
Investors must follow this meeting and understand its implications to make informed investment decisions.
Stay prepared for potential market shifts and seize opportunities wisely.

 

 

The Federal Reserve Meeting: A Globally Anticipated Decision

Japanese Stocks Steady Ahead of Monetary Policy Decisions

Japanese Stocks Steady Ahead of Monetary Policy Decisions: The main Japanese stock index on the Tokyo Stock Exchange ended
the week’s first session on Monday was relatively stable,
as investors awaited the Bank of Japan’s upcoming monetary policy decision later this week.
This comes after the anticipated monetary policy decision by the U.S. Federal Reserve, which was expected a day earlier.

 

Content
The European Central Bank

Japanese Stocks

The UK Manufacturing Sector

 

 

 

 

Lagarde: ECB Ready for Further Rate Cuts as Inflation Cools

European Central Bank (ECB) President Christine Lagarde stated that the bank
will continue reducing borrowing costs as inflation slows and nears the 2% target.

Lagarde emphasized that the inflation target is now within reach,
noting that the prolonged period of monetary tightening has improved the accuracy of economic forecasts.
This allows policymakers to focus on managing future risks without being overly concerned about previous inflation shocks.

In a speech delivered on Monday, reported by Bloomberg,
Lagarde highlighted signs of easing service price inflation in the coming months.
She also mentioned that the ECB may continue to lower interest rates if incoming data aligns with policymakers’ forecasts.

Lagarde further added that while domestic inflation in the eurozone remains high,
service price inflation has recently decelerated.


Japanese Stocks Stabilize Amid Anticipation of Monetary Policy Decisions

The main Japanese stock index on the Tokyo Stock Exchange closed Monday’s session
on a stable note as investors awaited the Bank of Japan’s (BoJ) upcoming monetary policy decision later this week.
This decision follows the anticipated monetary policy announcement by the U.S. Federal Reserve, scheduled a day earlier.

Meanwhile, data released earlier today revealed positive performance in Japan’s core machinery orders for October,
which exceeded expectations. This strengthens the outlook for increased capital expenditure in the coming months.
Purchasing Managers’ Indexes (PMIs) also indicated improvements in the manufacturing and services sectors in December.

Regarding trading, the Nikkei 225 index slightly declined by 0.03%, losing 12.95 points
to close at 39,457.27.
The broader Topix index recorded a more significant decline of 0.3%, shedding 8.23 points to end the session at 2,738.33.

 

 

 

UK Manufacturing Sector Contracts While Services Sector Expands in December

Data released by IHS Markit, part of S&P Global,
on Monday morning showed a contraction in the UK manufacturing sector in December.
The preliminary Purchasing Managers’ Index (PMI) for the manufacturing sector came in at 47.3,
indicating a decline in activity.
This reading was below market expectations of 48.4 and lower than November’s figure of 48.0.

On the other hand, the UK services sector showed positive growth,
with the PMI for the services sector rising to 51.4.
This figure exceeded market expectations of 50.9 and exceeded November’s reading of 50.8.

 

Japanese Stocks Steady Ahead of Monetary Policy Decisions

Oil Prices Steady Amid Middle East Tensions and Libyan Supply Expectations

Oil Prices Steady Amid Middle East Tensions and Libyan Supply Expectations: Oil prices stabilized at the start of trading on the first day of the last quarter of the year,
as expectations of Libyan supply returning diminished the impact of geopolitical risks in the Middle East.

 

Content
Oil Prices
Jerome Powell
Bank of Japan

 

 

 

 

 

Oil Prices Steady Amid Middle East Tensions and Libyan Supply Expectations

Oil prices stabilized at the start of trading on the first day of the last quarter of the year,
as expectations of Libyan supply returning diminished the impact of geopolitical risks in the Middle East.
Brent crude for December traded near $72 per barrel, following a slight rise on Monday,

with West Texas Intermediate exceeding $68.
The Israeli army announced targeted strikes against Hezbollah targets in southern Lebanon.
Meanwhile, Libya is preparing to resume production after the two rival governments reached a compromise,

according to people familiar with the matter.

Global Brent crude has dropped by nearly 17% in the last quarter and is now down for the year.
Expectations that “OPEC+” will implement production recovery plans and a slowdown in
Even after last week’s massive stimulus plan, China has weighed on prices.
“OPEC+” is set to hold an online monitoring meeting tomorrow,
Wednesday, as the coalition prepares to increase production.
Russian Deputy Prime Minister Alexander Novak said last week
that the group would begin restoring supplies in December and that no new proposals were being discussed.

 

Jerome Powell: Fed to Cut Rates Over Time as Inflation Steadily Declines

Federal Reserve Chairman Jerome Powell stated that the central bank would lower interest rates “over time,”
reiterating that the overall economy remains strong.
Powell also reaffirmed his confidence that inflation will continue moving toward the Fed’s 2% target,
noting that economic conditions are setting the stage for further easing inflationary pressures.

Speaking at the National Association for Business Economics annual meeting in Nashville, Powell said:
“If the economy evolves as expected, policy will gradually shift towards a more neutral stance over time.”
He added: “But we are not on a predetermined path,”
indicating that policymakers would continue making decisions on a meeting-by-meeting basis based on new economic data.
A neutral policy is one that neither stimulates nor restricts the economy.
The current interest rate, which the Federal Reserve lowered to 4.75%-5% earlier this month,
is still restraining economic activity.

 

 

Bank of Japan Signals Pause in Rate Hikes Following Major Fed Cut 

A summary of the Bank of Japan’s September meeting showed that
policymakers discussed the need to slow down rate hikes as volatile markets cloud the outlook,
reducing the likelihood of near-term interest rate increases.
The summary also highlighted how the U.S. Federal Reserve’s decision to significantly cut borrowing costs,
which came a day before the BOJ’s meeting on September 19-20,
raised concerns about the U.S. economic outlook.

One member said, “Uncertainty about the U.S. economy and the pace of Federal Reserve rate cuts has increased.
Attention must be paid to the possibility that these factors could negatively affect Japan’s yen’s exchange rate and corporate profits.”

The summary also revealed that even one advocate of future rate hikes called for patience in decision-making,
marking a shift from the previous July meeting when many
the nine-member board voted to raise rates to avoid the risk of extremely high inflation.

 

 

Oil Prices Steady Amid Middle East Tensions and Libyan Supply Expectations

Rise in Gold Prices

Gold Prices Rise: Global gold prices rose to over $2,400 per ounce during Wednesday trading.
This increase came just hours before the U.S. Federal Reserve’s (Fed) decision on interest rates was announced.

 

Content
Rise in Gold Prices
Important Decisions at Today’s Fed Meeting

Bank of Japan Raises Interest Rates

 

 

 

 

 

Rise in Gold Prices

Global gold prices rose to over $2,400 per ounce during Wednesday’s trading.
This rise occurred just hours before the U.S. Federal Reserve’s decision on interest rates,
and the daily drop to the $2,400 level had a counteracting effect. 

Additionally, slow global economic growth forecasts and the U.S. dollar’s drop from its three-week high supported gold prices.
Despite this, optimistic investors might hold back from making strong bets,
preferring to wait for more signals regarding the Fed’s path on lowering interest rates.
Therefore, the focus will remain on the outcome of the Federal Open Market Committee (FOMC) meeting,
with the interest rate decision expected to be announced later today.

 

Important Decisions at Today’s Fed Meeting

Federal Reserve officials are preparing to lower borrowing costs in the coming months.
Chairman Jerome Powell may hint at this move
at the end of today’s meeting amid rising risks to the labor market.

Fed Governors are expected to keep interest rates unchanged after two Tuesday and Wednesday meetings.
Rates will remain at their highest level in two decades. However, investors expect the Fed to lower interest rates in September.

Recent data has been encouraging, showing moderate price increases and strong economic growth.
However, the Fed wants more confirmation that inflation will continue to decline towards its 2% target. 

The drop in price pressures and a rise in unemployment have balanced the Fed’s dual
mandate of maximum employment and price stability.
Officials aim to tame inflation but do not want to
cause undue harm to the labor market by keeping interest rates high for too long.

 

 

 

Bank of Japan Raises Interest Rates:

After its July monetary policy meeting, the Bank of Japan’s Monetary Policy Committee
raised the target for short-term interest rates by 15 basis points,
from the 0% – 0.1% range to the 0.15% – 0.25% range.

The Bank of Japan’s decision was contrary to the expectations
of many experts but aligned with the broader market expectations.
The market had priced at a more than 65% chance of a rate hike,
Experts mainly predicted that the Bank of Japan would keep the target interest rate range unchanged at this meeting.

 

Gold Prices Rise

Mixed Performance of U.S. Indices

Mixed Performance of U.S. Indices: At the end of trading on Wednesday, U.S. markets’ indices showed mixed performance.
The
Dow Jones Industrial Average rose by 0.59% and recorded a new all-time high.
In contrast, the
S&P 500 Index fell by approximately 1.39%, and the Nasdaq Index dropped by about 2.76%.

 

Content:

Weak Growth in U.S. Production

Mixed Performance of U.S. Indices

Reasons for the Recent Strength of the Japanese Yen

 

 

 

Weak Growth in U.S. Production

Data released by the U.S. Federal Reserve for June showed that U.S. industrial production grew faster
than market expectations for the second consecutive month. Industrial production rose by 0.6% monthly,
compared to market expectations of only 0.3%.
The capacity utilization rate in the United States also increased to 78.8% in June,
higher than the market expectations of 78.6%.
It recorded 78.7% in May before being revised to 78.3%.

 

Mixed Performance of U.S. Indices:

At the end of trading on Wednesday, U.S. markets showed mixed performance in their indices.
The
Dow Jones Industrial Average rose by 0.59% and recorded a new all-time high.
In contrast, the
S&P 500 Index fell by approximately 1.39%, and the Nasdaq Index dropped by about 2.76%.

The communication, Oil & Natural Gas, and financial sectors saw gains.
In contrast, the technology, consumer services, and industrial sectors experienced losses,
leading to an overall decline in the general indices.

 

 

 

 

 

Reasons for the Recent Strength of the Japanese Yen:

In recent days, the U.S. dollar has seen a sharp decline against the Japanese yen.
This drop was due to repeated statements from members of the U.S. Federal Reserve suggesting a less aggressive monetary policy stance.

For instance, Federal Reserve member Waller mentioned that inflation data
has boosted confidence in the central bank’s ability to achieve its 2% inflation target.
He also indicated the possibility of slowing wage growth per this target.

Simultaneously, the Japanese yen received explicit support from statements made by Masato Kanda,
Japan’s Vice Minister of Finance for International Affairs.
Kanda warned about the yen’s depreciation and stressed that the relevant Japanese authorities
would not hesitate to respond appropriately if speculators caused excessive volatility in the foreign exchange market.

These statements from the Japanese official provided clear support for the yen against the dollar during the trading session.

 

Mixed Performance of U.S. Indices