The mid-point of the week looks likely to be somewhat quiet on the corporate front, however, the big macro news will be the latest interest rate decision from the Federal Reserve.
Unlike the keenly anticipated meeting of the Bank of England on Thursday, the Fed’s meeting is expected to be a much duller affair.
No change in Fed policy is anticipated “for the foreseeable future”, says Capital Economics, after three rate cuts last year.
AJ Bell’s Russ Mould is similarly expectant that the Fed will hold its fire, citing a CME Fedwatch survey that currently puts the likelihood of ‘no change’ at 87%, although they are simultaneously estimating a 75% probability that the Fed will cut rates at least once this year.
“Economists will also be watching for comments on the central bank’s intervention in the overnight bank funding (repo) market since the autumn. Fed Chair Jay Powell continues to swear blind that this is ‘Not QE4’ but whether it is Quantitative Easing or not share prices appear have feasted on the cheap cash that the Fed has been injecting into the markets since the autumn”, Mould said.
“However, we may now be reaching an interesting inflection point, as the Fed has started to gently throttle back its intervention in the repo market and its balance sheet has just started to shrink again. The Coronavirus scare is a more likely culprit but it may or may not be a coincidence that the S&P 500 index has become more volatile and suffered a couple of stumbles just as the Fed withdraws some liquidity”, he added.
All eyes will be on Powell’s press conference following the meeting to see if there is any new information.
“We expect to see very little changes to the broad economic assessment in the upcoming FOMC statement and expect chair Powell to continue to push a strong ‘on hold’ bias with regards to broad interest rate policy in his press conference,” said the economists at RBC Capital Markets.
The current stance is fairly certain to be unchanged, barring, Deutsche Bank said, a “material reassessment to the outlook”.
Significant announcements expected for Wednesday January 29:
Economic announcements: Federal Reserve policy decision, UK house prices