Economists at TD Securities discuss the Federal Reserve Interest Rate Decision and its implications for the Bloomberg Dollar Spot Index.

More hawkish (20%)

Fed delivers a pause while also strongly hinting at the possibility of an additional rate increase before year-end. Chair Jerome Powell emphasizes the strong rebound in output in Q3, while also downplaying the upcoming shocks to the economy in Q4, judging them as temporary. BDXY +0.20%.

Base case (70%)

Fed delivers another hawkish pause after staying on hold in September, with the Committee leaving the door open for an additional rate increase. That said, the FOMC will repeat that it aims to ‘proceed carefully’ as it formulates the next steps for policy, also highlighting its increased data dependence. We expect Chair Powell to underscore that while macro data since the Sep meeting has turned out unambiguously firm, the Fed can afford to be patient as it gathers more data. BDXY +0.10%.

Dovish (10%)

Fed pauses but signals less need for further rate hikes given the recent tightening of financial conditions (and downplays the Sep dot plot). Powell mentions that the best course is to be patient given the totality of policy tightening still in the pipeline, the ongoing reduction of credit supply, and the upcoming shocks that will dent output in Q4. BDXY -0.50%.