The US Fed will publish today its decision on the interest rate and monetary policy. All the experts don’t anticipate the rates to be raised as of today.
Analysts and market participants expect that after the meeting, the Fed members will come with more details about the timing and approach of the central bank to cut the size of its US bond portfolio.
Wall Street Journal says that there’s necessary a balance, hinting about the recent disappointing economic indicators. The Fed has to keep the monetary policy course in line with the decisions at the previous meetings.
In March, the Fed decided to increase the rate by 0.25% to 0.75-1% per year, and said that it wants two more rate hikes this year and three in 2018.
The March meeting’s minutes showed that the leaders of the Fed agreed with the necessity to reduce the volume of assets on the balance sheet of the bank before the end of this year.
The quantitative easing programs inflated the Fed's balance to $4.5 trillion, writes the Financial Times. Currently, the Fed holds US Treasuries worth $2.5 trillion and mortgage bonds worth $1.8 trillion.
The Fed "will not act aggressively," believes UBS O'Connor hedge fund analyst Erin Brown.
Today, the US bank reinvests profits from securities, the maturity dates for which expire, and, according to Brown, the Fed may begin reducing reinvestment by $10 billion a month from January next year.
This can continue until the balance sheet size is reduced to $ 3.5 trillion, the expert notes.
Some investors are expressing fears that the Fed's policy will be tightened soon.
"They raise the rate and reduce the balance," said an analyst at Boston Partners. "It could be catastrophic if the Fed is not careful”, added he.
According to the CME Group, the futures market estimates 63% probability of another rate hike by the Fed in June or earlier.
Ahead of the Fed’s decision, the US dollar keeps balanced today – EUR/USD fell 0.17% to 1.0911.