The US Federal Reserve is meeting again to discuss an interest rate increase, among other policies. But how does the Fed work?
The US Federal Reserve’s two-day meeting kicked off on Tuesday (June 13), and investors are widely expecting another interest rate hike of at least 25 basis points.
The central bank is scheduled to release its decision at 2:00 p.m. EST on Wednesday (June 14).
“The expectation of a rate hike … is widely held, and has been reinforced by the most recent round of Fed communications,” said Michael Feroli, an economist with JPMorgan (NYSE:JPM).
The gold price was trading lower on Tuesday ahead of the meeting, and was at $1,264.52 per ounce at 1:00 p.m. EST; it touched a low of $1,259.16 earlier in the day.
“Obviously ahead of the meeting people aren’t building significant positions … If anything, they’re expecting a dovish Fed because recent US economic data has been weak,” Fawad Razaqzada, an analyst at FOREX.com, told Reuters.
The market is also expecting more information on how the Fed will begin the long process of shrinking its balance sheet, something that could happen before Chair Janet Yellen ends her term at the beginning of next year.
“If the Fed is serious about reducing the size of its balance sheet this year and wishes to communicate those plans well in advance, it is running out of time to do so,” commented Michael Pearce, an economist with Capital Economics.
Fed policymakers will meet four more times this year after this week’s meeting, and it is important for investors to understand how the central banks works — after all, each decision made by the Fed can highly impact commodities, from gold to copper.
To make that easier, the Federal Reserve Bank of Atlanta has put together the following infographic that explains essential information about the Fed, its structure and functions. Scroll on to to see how it works.
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