Fed to hike 25bps, too soon to confirm it’s last

The FOMC is widely expected to raise interest rates by 25 basis points today, bringing them to a range of 5.25-5.50%. This comes after a short break in June. Recent talk in financial circles indicates that this might be the final increase in the Fed's current phase of tightening since inflation seems to be slowing down.

However, it is important to mention that the upcoming FOMC gathering is not slated until September 20-21, a substantial period of time where various important data will be released. These include two sets of PCE inflation, CPI, and non-farm payroll statistics. Additionally, during the September meeting, the Federal Reserve will present revised economic forecasts.

Considering the situation, it is very unlikely that the statement issued today will lessen the bias towards tightening. Jerome Powell, the Chair of the Federal Reserve, is predicted to continue being careful and emphasizing the commitment to control inflation. He may even repeat that, according to their latest projections, Fed policymakers had anticipated at least one more increase in interest rates this year. However, if these expected messages are deviated from, it could result in a negative impact on the US Dollar and a positive surge for stocks.

Currently, the anticipated increase in interest rates is at a meager 20% likelihood for September, 40% probability for November, and 36% chance for December. In contrast, market predictions indicate that the first reduction in rates might occur as soon as May next year, with a high probability estimate of approximately 81%.

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