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FOMC now with a tightening bias – Danske

FXStreet (Córdoba) - According to Signe Roed-Frederiksen, Senior Analyst at Danske Bank, after yesterday’s meeting, the Federal Reserve shifted to a clear tightening bias and kept the December as a ‘live’ FOMC meeting.

Key Quotes:

“The Fed sent a clear message in its October FOMC statement: a hike at the December FOMC meeting is a real option and whether we will see the first rate hike in December or next year depends upon the data.”

“In its forward guidance the Fed is now flagging a clear tightening bias as its wording was changed to ‘In determining whether it will be appropriate to RAISE the target range at its NEXT meeting...’ from ‘In determining HOW LONG to MAINTAIN this target range...’.”

“We continue to place the highest odds on a January rate hike from the Fed as we believe that the weakness in the manufacturing sector will keep the Fed in a wait-and-see mode at the December meeting but that it will use the meeting to prepare markets for a near term rate hike.”

“Given the tightening bias in tonight’s FOMC statement it seems fair that the market now attaches a higher probability, currently 45% compared to the pre meeting 32%, for a rate hike in December. A more firm pricing of a December rate hike, will require data confirming that the US economy is growing above potential.”

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