That's what we can really wait for today with this new meeting which is widely expected to come with no change again keeping the fund rate unchanged between 0 and 0.25%, as it has been since Dec. 16 2008 when the Fed cut the interest rate by 0.75% because of the credit crisis.

The Fed is still unable to raise rates with the current tame inflation pressure which persisted this year because of the relatively weak energy prices and the odds of raising rates themselves which supported the greenback this year putting pressure on the inflation broadly.

US PCE figure of August came to show the third month in a raw of rising yearly by only 0.3% and September figure is expected to come next Friday to show the same.

This rate is still obviously away from the Fed's 2% inflation target over the medium term which was the main reason why the Fed did not raise the interest rate earlier last September.

 With this tame inflation pressure, the Fed can keep waiting looking forward for watching evidence of inflation rising towards that target which has not been reached since March 2012.

 Since the beginning of this year US yearly PCE has managed to stand close to zero mainly because of the significant slide of energy prices which started by the beginning of the second half of last year.

The energy prices are undermined now not only by the new coming up oil offers from Iran and the oil productions from OPEC which exceeding its 30m daily limits reaching 32.01m in September.

While the expected economic slowdown of China is still looking hard to be compensated by improving in US or in EU which is still struggling.

The concerns around the recovery in EU and also the uncertainty about the Chinese demand could put more pressure on the commodities prices and the oil prices generally.

The FOMC has emphasized in September on the growth downside risks which can US because of the global economic slowdown, while there is no pressure yet on the Fed to hike the interest rate for containing inflation with no evidence yet to show that it is ascending to reach the Fed's 2% yearly inflation target.

The Fed's Chief Yellen has tried to raise the confidence in the US economy again when she was speaking later in Massachusetts University by highlighting existing probability of hiking rate this year cooling down the worries about the US economy.

Her talking could indicate that the Fed is having concerns the markets do not know.

She could really raise the market confidence in the US economy which grown annually by 3.9% in the second quarter but expected to show tomorrow by God's will growth by only 1.6% in the third quarter.

Yellen has tried previously to describe that raising rates will be by a gradual pace in early time can be this year otherwise there can be need for raising by a fast pace later.

Technically, This can be done as the Fed can start tightening taking this low inflation level as a reserve can help it later to halt hiking in the case of facing economic slowdown, as there is no high inflation pressure on it to raise rates.

The Fed has shown recently that it is taking into its account the low inflation pressure currently naming it "transitory low inflation" has resulted from the low oil prices, as later in first quarter of next year this situation can be different on elimination of the oil prices slide impact.

After each meeting of the FOMC this year, The Fed was repeating its appreciation of the housing market improving and its confidence in the US labor market recovery.

But these reasons were not enough for raising rates for the first time since 2006, despite the materialized up cycle of the economy which came with improving of the labor market.

Now the Fed's cautiousness can grow up higher, after US labor report of September caused crucial change of the interest rate outlook, as it had shown adding only 142k jobs out of the farming sector in September, while the market was waiting for adding 200k, with down revision of August reading to be 136k from 173k in the first reading.

While the monthly average earning per hour came unchanged and the market was waiting for rising by 0.2% following increasing by 0.4% in August to highlight again the weak inflation pressure which can be resulted from the wages too.

From another side, The worries about consuming performance are still looming in US sending more doubts, after Sep retails sales had grown by only 0.1% and US consumers confidence of October came yesterday to show plunging to 97.6, while the median forecast was referring to rising to 102.9 from 102.6 in September.  


Have a good day


Kind Regards

FX Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

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