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According to the latest employment report, the unemployment rate increased sharply, from 3.5% to 3.8%. The Fed is expected to keep the key rate hike at next week’s FOMC meeting.
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Due to the mixed August inflation report, the Fed will likely need to adopt a hawkish tone in its messaging.
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The US dollar will likely rise significantly due to the expected hawkish tone: USDJPY may reach the range of 148.50 to 149.00.
KUALA LUMPUR, MALAYSIA – Media OutReach – September 18, 2023 – The Federal Open Market Committee (FOMC) of the US Federal Reserve will meet on September 19-20 to decide on changes to monetary policy. Market expectations indicate the Fed will likely announce a pause, keeping the rate between 5.25% and 5.5%, near its highest level in 22 years.
At the previous FOMC meeting in July, the Federal Reserve raised its key rate again after a break of 25 basis points and now places it between 5.25% and 5.5%. The Fed’s rate hike policy aims to maximize employment and reduce and then maintain inflation at 2%.
According to the latest report from the United States Bureau of Labor Statistics released on September 1, 2023, the unemployment rate unexpectedly climbed to 3.8% in August, up from 3.5% in July. The rising unemployment rate will reinforce expectations that the Federal Reserve will slow or halt rate hikes.
New inflation data released by the United States Bureau of Labor Statistics on September 13, 2023 indicates that the consumer inflation rate in the United States increased sharply in August, from 0.63% to 0. 17% in July, and that the annual inflation rate accelerated in August, from 3.2% in August to 3.7%. July. The core CPI, which excludes food and energy, fell to 4.35% in August, from 4.65% a month earlier and in line with consensus.
“Based on the latest jobs report, the Fed is widely expected to keep its key rate hikes at next week’s FOMC meeting.” said OctaFX financial markets analyst Kar Yong Ang. “But because of the mixed August inflation report, the Fed must maintain a hawkish tone in its messaging. Core CPI is still too high and could accelerate. he added.
The key rate is expected to remain unchanged at the September US Fed meeting. Nevertheless, the accompanying speech could be quite harsh, signaling a possible further tightening of monetary policy. This would harm capital markets and encourage a stronger U.S. dollar. For example, this could impact currency pairs with the Dollar, potentially leading to USDJPY rising to the 148.50-149.00 range.
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