Upcoming FOMC Meeting; What To Expect?

Upcoming FOMC Meeting;
What To Expect? 

The Federal Reserve (Fed) will hold its FOMC meeting
on late Wednesday to release its policy statement and interest rate decision
followed by a press conference half an hour later. As the interest rate is
widely expected to remain the same at 0.00% – 0.25%, investors will shift their
focus on what will be included in the FOMC statement and the conference led by
Chairman Jerome Powell.

The rising number of COVID-19 cases in the US has led
a few state Governors to retreat on re-opening plans, forcing businesses to
shutdown while workers lose their jobs. First-time unemployment claims are also
rising last week, showing the country’s second outbreak’s impact.. The
Republicans (President Trump’s party) suggested a $1 trillion stimulus package
on Monday to extend the unemployment benefits; the Democrats (Opposition
party), however suggested $3.5 trillion instead. The final result will be
released by the US Congress this Friday.

Aside from stimulus packages (provided by the
government), the Fed’s role in supporting the country’s economic recovery comes
in the form of its’ Quantitative Easing (QE) program. The QE program is a type
of monetary policy loosening tool which involves the repurchase of government
securities from the market. The Fed previously mentioned that their QE program
would be unlimited, with the current pace of $4 billion purchases per day to
ensure smooth market functioning. 

However, during the upcoming FOMC policy meeting, the
Fed will most probably continue with their current stance without tampering any
action until clearer signals surface the market. Previously during the Fed’s
testimony, J. Powell mentioned that until there is confidence that the disease
(pandemic) is contained, a full recovery will be very unlikely.

The recent spike in cases will put the Fed in a very
uncertain position where they will most likely give way for the government to
take further action first, before implementing additional policy loosening or
tamper with their current stance. However, given the US current condition, it
is very unlikely that the Fed will deliver a hawkish tone to the market after
Tuesday’s announcement of the lending facilities extension until the end of
2020.