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The Fed’s Dilemma and What You Should Know about It

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The Fed’s Dilemma and What You Should Know about It PART 1 OF 7

Why the Fed Is Probably Undecided

Next FED meeting in September

The Federal Reserve will meet again on September 19, 2017, and the post-meeting press conference will be on September 20, 2017. Going into the meeting, Fed members will be faced with the dilemma of tightening the monetary policy further or providing a dovish statement seeking more time to observe the progress of the US economy. The markets (AGG) don’t seem to be pricing in another rate hike in 2017 with the Fed funds futures implying a 37.0% probability of a rate hike in December.

Why the Fed Is Probably Undecided

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Inflation and uncertainty to be limiting factors

Some key reasons the Fed could cite for scaling down the idea of monetary tightening is slowing inflation (TIP) and the rise in uncertainty (VXX) with respect to geopolitical issues. The Fed hasn’t included any measures for changes in the fiscal policy in its recent economic assessments, but that could change if President Trump announces the much-awaited tax reforms before the end of the year. In the September meeting, the Fed will most likely factor in the economic impact of Hurricane Harvey, which devastated the southeastern portion of the state of Texas.

Series overview

In this series, we’ll be looking at the performances of economic metrics that the Fed could be considering in its next move and the impact it might have on the bond (BND) and currency (UUP) markets. We’ll also analyze the recent comments from Fed members to better understand their outlook for the economy.

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