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FOMC is the Main Event Today


Stock index futures are higher despite tensions between Ukraine and Russia. In addition, investors remain cautious ahead of the main event today, which is the Federal Open Market Committee’s policy statement.

Mortgage applications were down 7.1% from a week ago, according to the Mortgage Bankers Association’s weekly survey.

December wholesale inventories increased 2.1% when up 1.3% was expected.

The 9:00 central time December new home sales report is anticipated to show 760,000.

Most likely there will be no surprises from the FOMC today. However, if there are any surprises it could be that they walk back some of their hawkishness.

The dominant influence now is the geopolitical risk, followed closely by the Federal Reserve.


Safe-haven flows of funds are supporting the U.S. dollar.

Expectations among the British public for inflation over the next 12 months increased to 4.8% in January 2022 from 4.0% in the previous month, hitting the highest level on record.

Financial futures markets have priced in up to four Bank of England interest rate hikes this year, which in the longer term, will likely support the British pound.

The Bank of Canada is widely expected to kick off the new year with a rate hike today with inflation well above the central bank’s target.

There was no flight to quality support again for the Japanese yen today, which is a sign of weakness.

An accommodative Bank of Japan will likely result in long-term pressure on the yen.


Most analysts are predicting the FOMC will keep its fed funds rate unchanged at 0% to .25% at today’s policy meeting.

However, Federal Reserve officials will likely signal that they will raise interest rates in March for the first time in more than three years and shrink their balance sheet soon afterwards.

There are expectations that the Fed will start reducing its $8.9 trillion balance sheet as early as in May.

Some analysts believe that if the rate of growth in the U.S. economy slows, and also the global economy, it may be difficult for the Federal Reserve to maintain its recently ramped-up hawkish policy stance.

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