Producer prices continue to recover, which gives hope for an increase in consumer inflation before the FOMC meeting tonight. Moreover, this contributes to the strengthening of positive expectations. Prices in November rose by 0.4% and growth of 3.1% remained stable for three consecutive months on an annual basis. This has been the maximum growth rate in almost 5 years.

In any case, the positive dynamics significantly reduce the deflationary mood and allows the possibility for the FOMC forecast for inflation to be updated at least as good as the month of September.

Markets are confident that today's rate will increase by a quarter point, which is already embedded in the quotes and is not capable of causing any significant reaction. Moreover, the markets see more than 60% chance of another increase in March 2018, and more than 30% in June based on the dynamics of CME futures. These expectations are more hawkish than a couple of weeks ago that indicate the strengthening of positive expectations.

Volatility can be caused two factors such as updated forecasts and rhetoric of the Fed Chairman Yellen at a press conference. As for the forecasts, the market will form the final position today when consumer inflation data for November will be published at 12:30 London time. The growth is projected to be 2.2% against 2.0% in October while there is no change in the root value at 1.8%. Any deviation from these expectations can cause some volatility since the expectations from the Fed's inflation forecasts tonight will also change urgently.

Until recently, the Fed was facing a difficult task in justifying rate hikes on a background of low inflation. This explains why it is not necessary to reduce the rate of normalization when the representatives of the Federal Reserve have repeatedly stated that low inflation is a temporary phenomenon due to the growth of the labor market, which will cause both the growth of people's incomes and the growth of inflation (the so-called "Phillips rule"). Hence it is clear that today's data on consumer inflation can cause a storm of emotions. If there are deviations from the forecasts in one direction or another and adjust the expectations following the meeting of the FOMC.

The forecast for the growth rate at the FOMC September meeting looks like growth rates will reach 2.1% in 2018 and 2.7% in 2019, after which stabilization comes in. This corresponds to three increases next year and it is important for the dollar. Otherwise, it will fall sharply immediately after publication.

As for the labor market, there are also difficulties here. Unemployment decreased to 4.1%, and further reduction is unlikely. Emphasis should be placed not on quantitative but on quality indicators such as the reduction of jobs with part-time employment and low qualifications. It is in fact dedicated to the Tramp-initiated tax reform.

The effectiveness of the proposed tax reform plan remains open. Yesterday, the Finance Ministry published a document where its disclosed plans for changing GDP. In its perspective, reforms will increase the economy's growth by 0.7 percent per year in the next 10 years and additional tax revenues to the budget will amount to 1.8 trillion for the same period. This conclusion is subject to uncertainty on the part of the expert community. it is believed that the result will be directly opposite since large groups of the population will receive a decrease in the tax burden as a result of the program, especially those with medium and low incomes.

The main point of the reform, growth of incomes of the population, is being questioned. Without this, it is impossible to count either on GDP growth or on filling the budget. The Fed's position for assessing the entire complex factors in the current situation will be highly significant and almost certainly the press conference will follow Yellen's questions about the Fed's relationship to tax reform. This assessment is another risk factor today, as it can cause increased volatility.

In general, the current situation can be characterized as cautious optimism. If the market is not disappointed in the expectations, the dollar will strengthen its power in the whole spectrum of the market by the end of the day.