It’s Federal Reserve decision day and anything from a 50bp to a 100bp in the federal funds rate is forecast. The Fed is facing the highest U.S. inflation in four decades which is why some market participants suggest that a full-percentage hike is on the table to show the Fed’s commitment in the inflation fight. However, chances of such a big move are only at 10 percent. The baseline scenario is a 50bp increase at today’s meeting.
The FOMC committee will release a statement and updated economic estimates at 18:00 UTC and Fed Chair Jerome Powell will hold a press conference 30 minutes later.
How will the U.S. dollar react?
In case of a well-priced-in 50bp rate hike, the dollar could even fall on disappointment. In case of a 75bp rate hike, the dollar will further strengthen. And in case of a 100bp hike, it will be a very bullish scenario for the greenback but chances of such a hike are small.
Furthermore, the focus will be on the Fed’s dot-plot, growth, inflation and jobs forecasts. Particular attention will also be paid to Powell’s press conference.
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