In the first post of this series, What Every Trader Needs to Know About the Fed, I walked through the basics of the Fed — what it is, how interest rates work, and why the dollar matters.
Now let’s look at what the Fed actually does.
The Fed has two main ways of influencing markets: Fed actions and Fed speak.
Fed Actions
Fed actions are the straightforward part. These are the policy changes that are announced after their two-day meetings — and they hold eight of these each year.
- Cutting the fed funds rate
- Raising the fed funds rate
- Holding steady
Even when they do “nothing”, that’s still a decision. Because at every meeting, they could make a move — so when they don’t, traders need to ask why.
Right now, for example, the expectation is a rate cut on September 17th. That announcement will come at 2 p.m. Eastern, right after the meeting wraps. You can always check the full Fed meeting schedule here: https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
Every Fed meeting is an opportunity for a change — and even no change is a message.
Fed Speak
This is where things get a little trickier.
The most influential Fed speak happens right alongside those policy announcements. When the Federal Open Market Committee releases its statement at 2 p.m. Eastern, economists analyze every word of it.
I’m not saying you need to dissect it like they do — but if you want the commentary straight from the source, this is where it starts.
Then, about 30 minutes later, the Fed chair (currently Jerome Powell) holds a press conference. He presents data and findings from the committee, explains their goals, and answers questions from the media.
This part is especially insightful because it often hints at the future pace of Fed actions.
The other type of “Fed speak” happens at various meetings during the year like the one in Jackson Hole Wyoming. Or various members of the Fed may be interviewed or giving talks and sometimes use language that media and markets react to. The good news is that you can know in advance when many of the major talks will be give, I use the Forex Factory to monitor these events: https://www.forexfactory.com/calendar
The Fed moves markets not just through their actions, but through their words. Traders who understand both are a step ahead.
The Data Challenge
For as long as I’ve been following the Fed — over 20 years now — they’ve always been very data-driven.
The challenge? The data – whether it’s inflation measures, GDP, or jobs reports – is by design lagging (not leading). We only see what happened last month, not what’s happening this very minute.
It’s the best they have to work with. And honestly, it’s the best we have, too.
Or is it???
👉 We’ll explore that question in my next post.
~Hima
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