Fed to remain stoic in face of market gyrations

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Statement will show central bank on track for December hike and three more next year.

The Federal Reserve this week will remain impassive about the recent volatility in financial markets after their two-day policy meeting, and continue to signal a policy of continued, gradual, rate hikes economists said.

“Some people may wish the Fed to hint about it, but the central bank won’t say it’s having second thoughts. Not this time. They have to wait to see how things move,” said Nathaniel Karp, chief economist at BBVA Compass, in an interview.

The Dow Jones Industrial Average fell 7.6% in October, the largest one-month percentage decline since May 2010. The S&P 500 index was down 9.4% for the month.

“The Fed needs to be appear that they are the ones flying the plane. The markets can’t dictate what the Fed is going to do,” Karp said.

Richard Moody, chief economist at Regions Financial Corp. in Birmingham, agreed: “Our view is that the FOMC is not, a least not yet, uncomfortable with the tightening in financial conditions brought about by lower equity prices."

After two days of talks, the Fed will release a policy statement on Thursday at 2 p.m. Eastern. This is the last FOMC meeting without a formal press conference with Fed Chairman Jerome Powell.

Some analysts said Powell’s comment in early October that “we’re a long way from neutral” was a trigger for the market selloff.

 

 

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