All eyes in the markets are set toward the Fed's interest rate decision to be announced at Wednesday's FOMC meeting by 7 PM (GMT +1).
Here's what you can expect from the upcoming announcement.
- 0.75 point rate hike. For the 4th time in a row, the Fed is expected to raise interest rates again to continue its aggressive battle against surging inflation. Immediately following the release, analysts expect to see a relief rally in stock and other instruments, before the general selloff continues.
- Dot plot release. Perhaps even more important than the interest rate announcement is the Fed's forecast about its possible future actions, and sentiments concerning inflation and the economy.
- The dot plot will show the projections for short-term rates, and indicate the path of future interest rates. If the Fed remains hawkish, investors will interpret that as indicative of continued high inflation, leading to the prolongation of the bear markets.
- Negative CPI and increase in unemployment. Repeated remarks over the past weeks point to the central bank’s determination to fight inflation even at the expense of economic growth and employment. Expect an echo of this sentiment in negative numbers for CPI, PPI, and Employment situation.
- Negative GDP and recession zone. The Fed's plan includes raising the target rate above the neutral zone into the restrictive zone. 2.5% used to be the neutral zone, but the Fed is set to move the rate to about 3.25%.
- Analysts can't decide on what exactly to expect from the new rate zone but all agree that there will be such an economic slowdown that GDP will be affected, and the U.S.A might finally enter into an official recession.
