"It would shock markets if they did not rise and show political capitulation," said David Kotok, co-founder and chief investment officer of investment firm Cumberland Associates. "Trump's attacks on the central bank are of no use to anyone."
Greg Valliere, chief strategist at Horizon Investments, argues that inflation and the growth of the Fed's growth estimates on Wednesday would give the opportunity to skip a rate hike. except the Trump factor.
"We do not believe Chairman Jay Powell pays much attention to the President, but cynics in the bond market and elsewhere would howl to politicize a Stand-Pat Federation," Valliere told his clients a recent note.
Valliere described "two great Fed ironies". First, the central bank must raise interest rates just because of Trump's pressure. And secondly, Trump had "the most reticent Fed chairman in our lives ̵
In fact, Trump Fox News lamented that former President Barack Obama had "zero" interest rates for years. At that time, of course, former Fed chief Janet Yellen tried to make the economy healthy again. In any case, Trump will probably be disappointed on Wednesday by the Fed.
PIMCO's Joachim Fels and Andrew Balls wrote in a report last week that a "break" in the first half of 2019 "seems increasingly likely". Bank of America Merrill Lynch expects US Federal Reserve 2019 dot plots to signal two and only one increase in 2020. Even Goldman Sachs, who has long called for four rate hikes in 2019, has softened his view of Fed policy.
Nevertheless, Trump's attacks on the Fed for Powell, which was nominated by the president, make unpleasant changes.
While Trump is concerned about short-term economic and stock market volatility, especially before the 2020 election, the Fed has further concerns.
The central bank, an institution proud of being above politics, is accused of protecting itself against the risk of runaway inflation. The 1970s showed how weak inflationary peaks can be.
The US Federal Reserve must protect the reputation of the central bank as an independent state. Otherwise, investors may lose confidence in the stability of the system.
"History documents the abuse of central banks, which are influenced by political forces that lead to inflation and eventually to hyperinflation – Venezuela, Zimbabwe and the Weimar Republic," Kotok said. "The importance of central bank independence can not be overstated."
2. Bank of England: With Britain deeply involved in Brexit riots, investors are watching the Bank of England meeting on Thursday. At its last meeting in September, it left interest rates unchanged at 0.75%.
"Since the committee's last meeting, there have been signs of greater uncertainty about future developments in the process of withdrawal, especially on the financial markets," it said.
3. US GDP: The US Bureau of Economic Analysis will publish its third estimate of GDP for the third quarter on Friday.
5. This week will appear: