Price Analysis

Things to Consider During Fed’s Financial Decision This Week

Briefly

  • Federal Reserve’s policy looms large.
  • Markets expect a 75 basis point rate hike.
  • How will the rate’s landscape appear in 2023?

This week will see one of the crucial financial decisions by the US Federal Reserve. It’s time for the Fed to deliver after the European Central Banks surprised with a 50 basis points increase last week. Investors waited for a 25bp hike from the ECB.

The latest sessions have seen the financial space recording choppy moves, and lots of pressure emerges ahead of the monetary decision by Fed. Here are things to watch for during the upcoming rate move:

  • Federal Reserve’s inflation
  • 75 basis points rate increase this week.
  • Will the Fed highlight another 125 basis point hike this year?
  • The Federal’s stance on rate cuts come 2023.

Fed’s Stance on Inflation

The crucial thing to consider during this week’s financial conference is the Fed’s perspective on inflation. If market players trust Fed views inflation declining quicker come next year, they could contemplate more rate cuts in 2023. Furthermore, easing inflation in the US would mean reduced pressure on central banks and other economies.

75bp Hike This Week

The last week’s weak ISM numbers had some market players predicting only a 50 basis points rate increase this week. However, the Federal had previously signaled that deteriorated data wouldn’t deter it unless inflation cools. Thus, investors should be ready for a possible 75 basis point rate surge during the upcoming financial conference.

How Far Will Fed Tighten This Year?

Though the Fed has led other banks in rate hikes this year, analysts expect the trend to continue. Therefore, investors should contemplate another 125 basis points on top of this week’s 75bp hike. The best thing is to focus on Fed Chair’s comments during the monetary meeting. Deviations from the 125 basis points plan would catalyze more volatility within the financial space.

2023 Rate Cuts

Lastly, the Federal’s stance on economic activity and 2023’s inflation landscape is crucial for the markets. Meanwhile, individuals ponder multiple rate cuts next year, though it could be early to gauge Fed’s plans. A wait-to-see strategy remains logical, considering inflation is still high while supply shock affects the worldwide economy.

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