Mohamed El-Erian, Allianz's chief economic adviser, penned an article on Bloomberg in which he discussed three topics investors and traders should be aware of heading into Wednesday's Federal Reserve meeting.
First, Fed officials are "likely to set the stage" for a future interest rate hike – perhaps at the next meeting in June. There are several factors that will determine a rate hike, including labor market conditions, the recent easing in financial conditions and the central bank's "eagerness" to continue adopting a more "careful" monetary policy.
Second, any policy stances will be less dependent on domestic data than it is on global events, such as the U.K. referendum dubbed "Brexit." However, "high international uncertainty" and "some excessive valuations" implies the Fed may be "reluctant" to "surprise" the market.
Finally, while the Federal Reserve's meeting will "draw the attention" of investors and traders, the most interesting event this week will be the Bank of Japan's meeting on Thursday. Japan faces an "extremely tricky" policy decision and any outcome from the meeting will be closely watched.
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