The USA implemented a tightened monetary policy to combat rising inflation since the end of 2021 and continued by increasing interest rates.
While inflation began to cool in the USA, which is struggling with the highest inflation of the last 40 years, the FED did not increase the interest rate in September and kept it constant between 5.25% and 5.5%.
Although the FED kept interest rates constant in September, most FED officials stated that they predicted another 25 basis point interest rate increase in 2023.
At this point, while all eyes are on the FED's interest rate decision to be announced at 21:00 (UTC 18:00), expectations are once again focused on the FED keeping interest rates constant.
According to CME Group's FED Watch tool, the probability of no interest rate increase on November 1 is priced at 97.7%.
Although expectations are for interest rates to be kept constant, the markets will closely follow possible changes in the interest rate decision text and the verbal guidance of FED President Jerome Powell at 21:30 GMT, rather than the interest rate decision.
At this point, the signals from the policy text and the statements of Fed Chairman Jerome Powell are expected to have an impact on asset prices.
Additionally, markets will try to understand the FED's intention to increase interest rates in December from the policy text and Powell's statements.
Speaking at the Economic Club of New York recently, FED President Jerome Powell hinted that the FED could keep interest rates constant.
Stating that inflation is still very high, Powell said, “Further evidence of above-trend growth or that the labor market is no longer loose may require further tightening of monetary policy.” He gave messages that further interest rate increases were still possible.
*This is not investment advice.