A Preview of Today’s FOMC Statement

The financial community had hoped to know the result of the U.S. elections by the time the Fed issues its statement and press conference, but it seems that is not the case. The votes are still counted as both candidates still have chances to win the minimum 270 number of electors that guarantees victory. 

As the counting continues, it is difficult to know who will win the White House. However, two things are clear, regardless of the winner: there is no “blue wave,” and the Fed’s policy will likely remain the same.

New Easing from the Fed?

It appears that the Reserve Bank of Australia (RBA) kick-started a new era of quantitative easing for the rest of the year. This week, the RBA lowered the cash rate to 0.1%, effectively to the lower boundary. Additionally, it delivered more easing via an increased quantitative easing program. Coming from a central bank that applies its monetary policy in a country that better managed the COVID-19 crisis, this may act as a warning signal about what is about to come from other central banks.

The Fed is scheduled to release the FOMC Statement and hold the press conference one day later than usual. Normally, every six weeks, on a Wednesday, the Fed makes its decisions public. However, this week is different because of the U.S. elections. As such, on Thursday, we will have the Fed and one day later the Non-Farm Payrolls (NFP) release for the month of October.

Therefore, it may very well be the case that the Fed’s decision comes in second place as important this week. If we do not know the result of the U.S. elections by Thursday, the driver for the market’s volatility remains the battle for the White House.

As for the Fed, it already eased some more its policy stance. More precisely, at the end of October, it adjusted the terms of the Main Street Lending Program by making it more accessible to businesses. As such, it lowered the minimum loan size to $100,000 from $250,000 so that more small businesses may access the facility.

Let us not forget what Fed’s Powell said many times during the current crisis – the Fed has lending powers, and that is pretty much all it can do. However, there is a saying among market participants regarding the Fed that there is always something more than the Fed can do.

If that is the case, we will find out in a little more than 24 hours.