All Eyes On The Fed - Markets are Waiting For Interest Rate Decision

Submitted by Marco on 28 June, 2006 - 11:41

Watching and waiting. But while waiting I've taken advantage of this recent volatility to make some profits. The recent volatility in stock prices and foreign exchange rates worldwide is simply waiting for one number. The US interest rates. Currently the interest rate stands at 5 per cent. The Federal Open Market Committee (FOMC) from the Federal Reserve in the USA will determine whether or not to raise rates at their two-day meeting, ending June 29. If you are trading where the markets are open - namely the US as well as forex markets, watch out for a sharp reaction to any rate rise. The decision will be given out at Thursday Afternoon 2.25 pm (1415 hours) New York time, or UTC 1815 hours and Sydney local time at 0415 hours on Friday morning.

The World Markets are Awaiting the Interest Rate Decision by the Fed

"Here are some factors likely to influence the Fed's decision-making:

"* Consumer prices outside food and energy have surpassed forecasts by jumping 0.3 percent for three consecutive months, with the year-on-year measure reaching 2.4 percent in May.

"* Growth data have shown signs of slowing, with housing activity easing as expected and consumer spending ebbing at the start of the second quarter. May retail sales rose only 0.1 percent, and were actually down 0.1 percent when the effects of higher gasoline costs were excluded.

"* Gross domestic product surged at a blistering 5.3 percent pace in the first quarter, but is expected to ease back toward a more trend-like range of 3 percent to 3.5 percent in the second quarter -- perhaps softening even further toward the end of the year.

"* Corporate earnings have remained strong, raising hope that business investment will pick up the slack where over-leveraged consumers leave off. The Institute for Supply Management's closely watched index of manufacturing activity has hovered near 60 for four months, indicating very robust performance in the factory sector.

"* In the backdrop to the Fed's monetary tightening campaign are financial markets that look to be at their most volatile in many years -- a trend partly due to the unwinding of global liquidity unleashed by years of easy credit. This makes transparency and predictability on the part of the central bank all the more crucial to global stability.

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