FOMC Preview - No Change in Policy Rate, Upgrade in Economic Outlook

The Fed is expected to leave the Fed funds rate unchanged at 0-0.25%. What the market interested in the most is whether the Fed will change the statement, '... economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period', that appeared in September. Concerning economic forecasts, the Fed should have upgraded its outlook on growth given strong economic data released since last meeting.

We anticipate policymakers to keep the above-mentioned statement with the phrase 'an extended period' retained. The Fed prefer to see the job market stabilize and recovery more sustainable before exiting from the current ultra-expansionary monetary policy.

Concerning asset purchases, the $300B Treasury purchase program was completed in the final week of October. In the September meeting, the Committee announced extension of the MBS and agency debt program through 1Q10. We believe not much new information will be given in November.