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Fed Interest Rate Decision
The interest rate (key rate) — is the main indicator of credit resources’ value in the economy.
The key rate is the rate by which the commercial banks can be credited from each other or at the central bank. In general, it talks about short-term borrowings for one night (overnight credits).
The level of the Central Bank’s rate directly influences all rates in the economy: both credit rates and deposit rates. Changing the amount of rate, the Central Bank can soften or tighten the monetary policy depending on the current goals. In turn, the changes in the policy of the Central Bank influence employment, GDP, inflation, and many other macroeconomic indicators.
The financial regulator reduces the key rate and the monetary policy softens. Less expensive credit resources can help the economy to recover from recession — restore the business activity, decrease unemployment, increase the GDP growth rate.
In case the growth of prices threatens the stability of the financial system, the Central Bank tightens the monetary policy. The rise of the interest rate makes credit resources less available, leads to the slowdown and downturn, and exerts pressure on inflation.
In 2011, David O. Lucca and Emanuel Moench published their study showing that returns on U.S. equities tend to be higher in anticipation of scheduled meetings of the Federal Open Market Committee (FOMC). The research was called the Pre-FOMC Announcement Drift. Let's see if there is a spike in gold and silver prices in the 24 hours before the FOMC meeting.
In this article, we will talk about the economic calendar and determine what is better to rely on when making a decision to open deals: forecasts or previous values of indicators.
Today we will study the reaction of the foreign exchange market to the publication of revised values of economic indicators. And let's see if it's worth relying on them when making a decision to enter the market.
The presented to your attention article opens a series of articles on trading on price rollbacks related to the publication of economic indicators. These articles will contain a unified analysis methodology, but the subject of consideration will be various economic indicators of the main economies of the world.