Wednesday preview: Federal Reserve likely to stand pat on interest rates

With the US presidential election just around the corner, the Federal Reserve is widely expected to keep interest rates unchanged on Wednesday.

The Federal Open Market Committee is expected to announce it will leave rates at a range of 0.25% and 0.50% following its two-day policy meeting, as it waits for the outcome of next Tuesday’s presidential election.

Many see the Fed raising rates in December amid signs the economy is improving with inflation closer to the central bank’s 2% target, stronger levels of consumer spending and a buoyant labour market. Comments from policymakers have indicated that at least one rate hike is still on the table this year.

“Latest round of economic releases supports the idea of tightening policy with growth bouncing back from a weak first half in 2016, jobs added to the economy averaging at 191,000 in the last three months, and more Americans buying new homes,” said Hussein Sayed, chief market strategist at FXTM.

Investors will be scrutinising the policy statement for any clues on when the Fed is likely to raise rates. HSBC said it will be important to see if the FOMC decides to adjust its forward guidance, which would potentially indicate that it will be considering a rate increase in December.

“Financial markets are pricing in about a 75% probability of a 25bp rate hike by the end of the year,” HSBC said.

“If the policy statement is left broadly unchanged in November, that would leave open the possibility of a December rate increase but would fall short of a strong commitment.”

Wednesday 02 November

INTERIM DIVIDEND PAYMENT DATE
Andrews Sykes Group, Carillion, StatPro Group

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Crude Oil Inventories (US) (14:30)
MBA Mortgage Applications (11:00)
MBA Mortgage Applications (US) (11:00)
Unemployment Rate (GER) (08:55)

Q3
Indivior, Livanova , Smurfit Kappa Group

IMSS
Old Mutual

UK ECONOMIC ANNOUNCEMENTS
BRC Shop Price Index (00:01)
PMI Construction (08:30)