[Preview] Will the FOMC announcement before dawn tomorrow be suspended or over?

03:00 AM (Thu), 2023/9/21 (Thu) Japan time, the US Federal Reserve (Fed)Interest rate decisionDo it,Latest quarterly economic forecasts and interest rate dot plots announcedI will. Economists anticipate that the Fed will leave interest rates unchanged after the meeting ends.

FOMC press conferenceIs30 minutes later 03:30 a.m.It is scheduled to be held at It seems that Fed Chairman Powell's speech at the annual central bank summit held in Jackson Hole, Wyoming, USA last month satisfied both hawks and pigeons. With a combination of anti-inflationary rhetoric and dovish content, no specific plan on whether to raise interest rates at future meetings was clarified. The tone of this statement is likely to be reflected at this week's meeting as well.

●There is a possibility that the Fed will revise its seasonal economic forecast upward
According to a Bloomberg survey, there is a possibility that the Fed will raise the economic growth rate in 2023 to 2.0% (the Fed predicts this year's growth rate to 1.0% in June) and lower the unemployment rate from 4.1% to 3.9%. It is said that the PCE price index will remain unchanged, and there is a possibility that the core PCE inflation rate will be slightly revised downward.

The strength of the US economy can be seen in recent increases in the Red Book retail sales index. This index increased by 4.60% compared to the same week last year in the week ended 9/9.

●Inflation Expectations
According to the latest statistics from the University of Michigan, consumers expect the inflation rate to drop from 3.5% to 3.1% in one year and the inflation rate from 3.0% to 2.7% in 5 years. The recent rise in crude oil prices has also given a sense of uncertainty about the future, but there is a possibility that the view that inflation will continue to ease until the end of this year will be strengthened.

● The possibility of a recession
According to a Bloomberg survey, 45% of economists expect the US economy to fall into recession within the next 12 months, and 55% of them think a recession will occur in the first quarter of next year.

● The unemployment rate is likely to be nonlinear
The Federal Reserve (Fed) has taken into account the fact that predictions have completely deviated due to past recessions, and is now complementing conventional predictions with “fan charts” that place probability bands around “average predictions.” According to the “average forecast” based on Bloomberg's model, the unemployment rate will rise to 3.9% by the end of 2023, which is consistent with the soft landing consensus. However, what is particularly noteworthy in the model results is that the risk to the unemployment rate outlook is asymmetrically skewed upward.

●Fed balance sheet
There is a possibility that the Fed will suspend interest rate hikes in September, but since the Fed is gradually reducing government bonds and MBS, the Fed's balance sheet is still steadily shrinking. This means that US monetary policy may still be limited by quantitative measures.

● It is likely that the ECB will reach the peak of interest rate hikes, and what kind of impact will it have on the Fed?
There is a possibility that interest rate hikes in the Eurozone have come to an end.

The market understands this as implying that interest rates have peaked.

Although European Central Bank President Lagarde denied the statement that “interest rates have peaked” at the press conference, it is clear that market pricing is biased towards ending interest rate hikes. According to Overnight Swap, the market predicts that the probability that the European Central Bank will raise interest rates in October is only around 20%.

It is thought that the policy policy of the European Central Bank is the guideline of the Federal Reserve (Fed). The reason is that if the interest rate difference between Europe and the US widens, the depreciation of the euro will progress further, which will affect US exports and economic stability.