The Fed's Next Monetary Policy Decision: Interest Rate Hikes Could Come Sooner Than Markets Currently Expect

Hello folks, The Fed's next monetary policy decision is on Wednesday, and one of the questions going around is whether Fed Chief Janet Yellen is going to go "Carney" or maybe even "The Full Carney."

Last week, Bank of England chief Mark Carney warned that interest rate hikes could come sooner than markets currently expect.

Specifically he said:

"The MPC's current guidance makes clear that we will set monetary policy to meet the inflation target while using up that spare capacity. This has implications for the timing, pace and degree of Bank Rate increases. There's already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. It could happen sooner than markets currently expect. But to be clear, the MPC has no pre-set course. The ultimate decision will be data-driven."

So the big question is whether Yellen says anything similar tomorrow. In a note to clients, Citi's currency analyst Steven Englander asked: Will FOMC/USD have a Carney/GBP moment?

For those not up on their jargon and acronyms, the question is, will the Fed cause the dollar to spike the same way Mark Carney caused the spike in the British pound in the immediate aftermath of his comments?

Englander thinks that any indication from Yellen, that the tightening in policy could come sooner than expected, could have a dramatic effect on currency markets. As evidence, he points to today's currency reaction from one hot inflation report.

Source: business insider