Fed is widely anticipated to deliver another 25bps rate hike today, bringing federal funds rate target to 5.00-5.25%. Despite ongoing concerns over regional banks in the US, Fed appears unconcerned about overall financial stability. Service prices remain sticky, even as inflation appears to be declining.
With market pricing in near 90% chance of the 25 bps move, surprises seem unlikely. However, after this increase, fed fund futures indicate an almost 100% chance of no change in June, with the path beyond that trending downward. FedChair Jerome Powell may stay non-committal in the post-meeting press conference, and point to June’s new economic projections for guidance. But a more explicit pause signal could boost risk markets.
Here are some readings on FOMC:
- Fed Hike, Then What?
- Will the Fed Hike Rates for the Last Time?
- Fed Preview: One More Hike – Cuts Still Far Away
- April Flashlight for the FOMC Blackout Period: Is the Tightening Cycle Coming to an End?
As for US stocks, despite initial selloff yesterday, major indexes recovered some ground and close down around -1% only. NASDAQ is still struggling to break through 12269.55 resistance. But near term bias will remain on the upside as long as 11798.77 support holds. The real test lies in 38.2% retracement of 16212.22 to 10102.61 at 12436.48. Decisive break there will be a solid bullish sign that should push for at least a test on 13181.08 cluster resistance. Nevertheless, firm break of 11798.77 support could prompt near term reversal, and steeper selloff back to 10982.80 support and possibly below.
