Why wait for the dollar from Jerome Powell and his colleagues?

Today, the Federal Reserve System (FRS) will announce its decision on monetary policy and will publish updated forecasts, including on economic growth and inflation in the country.

It is expected that following the results of the next meeting of the American Central Bank will leave the interest rate at the level of 2.25-2.50%.

At the same time, macroeconomic forecasts for the current year are likely to be revised downward.

In January, the Fed signaled that it intends to take a cautious approach in the matter of changing the interest rate.

What does the regulator's call for patience mean? Will he no longer raise the rate this year? The answer to this question can give a "point" forecast.

The following options are possible:

1. The revision of the forecast to one increase per year is the most likely scenario that will allow the Fed to return to monetary policy tightening, provided that global economic growth begins to recover and the momentum for the rise of the American economy continues. In this case, the reaction of the dollar may be positive but its growth will be limited.

2. The scenario that does not involve a single rate increase in the current year will have a negative effect on the greenback. At the same time, it will support the possibility of lowering the rate in 2020 or earlier, which could even derail the US currency.

3. Keep the forecast unchanged. If the Fed surprises the markets by leaving two acts of monetary restriction on the table this year, the dollar will be back on the line.

In addition to the rates and macroeconomic forecasts, investors are also interested in the question of how far the Fed will reduce the volume of assets on its balance sheet.

Earlier, FOMC representatives hinted that this process could already be completed this year and made it clear that they would soon publish a detailed action plan.

For the dollar, the soonest completion of the balance reduction program will mean an increase in the volume of currency in circulation, with which the "American" can become cheaper. It is assumed that the extension of the program until 2020 will be a positive moment for the greenback and its curtailment in the near future will be a negative one.

Thus, the dollar is waiting for the outcome of the next meeting of the Federal Reserve, which can help determine the future direction of movement.

The material has been provided by InstaForex Company - www.instaforex.com