What to watch out for post the US Federal Reserve meeting?

MUMBAI: The US Federal Reserve policy outcome will be closely assessed. Key points that will remain in focus include:

Janet Yellen’s commentary: Post policy press conference is likely to witness the Fed Chair maintaining a dovish stance and highlighting the ‘gradual’ and ‘data dependent’ nature of further policy action.

Cues on risk management by the Fed: Details pertaining to the possible tools (such as reverse repurchase operations) to be used by the Fed as it begins its normalisation process will be watched. Particulars regarding the Committee’s strategy for ceasing or phasing out reinvestments will also be tracked.

Inflation: The policy statement is likely to be extremely cautious in its inflation view, all the while continuing to reiterate its view that inflation will move towards the 2.0% mark in the medium term. Changes in inflation projection will be closely tracked. However, changes to the 2017 and 2018 projections are likely to be modest at best, as labour market recovery is expected to offset the decline on account of softer commodity prices over the medium-term.

Economic activity: The Committee is expected to maintain the rhetoric of moderate expansion given the encouraging details of the Q3 2015 GDP growth.

Labour market activity: The stance of “slowed pace of job gains” in the October meet is likely to be upgraded given the strong prints in the intermeeting period. Sight downward revision in the unemployment rate forecasts is possible.

Dot plot: Slight lowering in the ‘dot plot’ for Fed funds rate projection signalling a more gradual pace of interest rate hikes (as reflected by the stance of Fed members) is expected.