US Federal Fund Rate; Inflation A Big Threat To The economy, Could Tapering Be Gradual?

The federal fund rate is the interest rate in the United States and stood as a paramount factor in currency valuation in a nation. It is highly correlated with the economic outlook because its changes can affect both inflation and recession.

Ahead of the Federal Oder Market Committee (FOMC) meeting on the monetary policy review today by 7 pm (GMT + 1), the US Dollar experienced a mixed performance but resolved and it’s gaining with acceleration to the upside.

From inception, the federal reserve has used the Fund rate as its core monetary policy tool to achieve its policy goals and objectives.  The goals are geared towards enhancing economic conditions that ensure price stability (inflation control) and maximum employment.

Currently, inflation is hitting hard at a 5.4% multi-year high and the cost of goods and services keep sky-rocking. This is posing a big threat to the economy, though there is a hitting debate that the inflation is transitory and will likely normalize in the near term. Supply chain disruption and chip shortages is also a big driver of hiking prices.

Unfortunately, the job market is still thriving below the pre-pandemic state but the recovery steadies.

According to the CNBC Survey outlook for tapering and rate hike, it was revealed that “the Fed will announce the decision to taper and will likely hike the interest rate much sooner than previously anticipated”.

From the outlook, an announcement for a reduction in asset purchase could probably be in its proceeds this month but the fed will go slowly.

Its unemployment rate stood at 4.8% with speculation of further decline in the near term. The gross domestic product increased 7.8% and the purchasing Manager’s Index up 60.8% indicating an Industry expansion.

The market is beginning to price in ahead of the FOMC monetary press conference as the US stocks such as US30(Dow Jones), US100(NASDAQ), US500(S&P 500), US Shares such as Tesla, Apple, Facebooketc. are holding firm in gains and they can be traded on the ACT brokers trading platform (https://actmarkets.com/) with the best spread and trade execution. On the same wave, Gold (XAUUSD), EURUSD and GBPUSD experienced a slight pullback to the downside.

Regardless, traders should brace themselves up for a period of high volatility as The Federal Fund Rate report often has a great impact on the FOREX market. An increase in Fund Rate will usually strengthen the United Dollar, while its decrease will usually weaken the United Dollar.

Traders should always be aware that volatile markets provide great opportunities for making profits, as the increase in volatility can cause market swings for traders to capitalize on.

The currency pairs that include the US dollar, US Futures, US indexes, US Commodities, and Shares are mostly affected by the data release. They include: EURUSD, GBPUSD, XAUUSD, USDJPY, USDCAD, USDCHF, AUDUSD, NZDUSD, US100, FTSE, US Oil, Facebook, Amazon, Tesla etc.

Time Schedule for next Fund Rate release:

Date: Wednesday November 3rd, 2021.

Time: 7:00 pm (GM + 1)

Author:
Amogo Solomon is a Forex Dealer / Global market analyst and writer in ACT Brokers with a background in Computer Science, Data Analytics and Forex Dealing. He specializes in Forex Dealing, Global market strategies, Forex fundamental and technical analysis, and Monitoring of Forex trends, Stocks, Equities, Cryptos, and Commodities. He possesses strong technical and analytical skills and is well known for his entertaining and informative analysis of the global economy, fiat currency, commodities, Stocks, Indexes, Futures, and Options markets. He held a Bachelor's degree in Computer Science and Nanodegree in Programming for Data Science Enterprise.

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