The Fed is widely expected to raise its benchmark interest rates by 25-basis points today; anything else would be a shocker.
The critical question that’s at the forefront of the market’s collective mind is whether this week’s Fed rate hike will indeed be the last of the cycle.
If Chair Powell leans into expectations that the FOMC is ready to pause, or at least skip a September hike, that may encourage further risk-taking across global financial markets.
However, should the Fed acquiesce to its June dot plot and swing the door wide open for yet another rate increase, such repricing should prompt an immediate but possibly limited recovery for the US dollar, while weighing on the likes of gold, stocks, and oil.
Chair Powell’s policy cues later today will also frame how markets interpret top tier US economic data, especially around jobs and inflation, in the leadup to the next FOMC meeting in September.
