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All Eyes on Fed Interest Rate Decision

August 09,2022 11:53:50

The US Federal Reserve is all set to announce its policy decision at 2 p.m. ET on Wednesday, July 27, 2022. The Fed, during its June meeting, boosted the funds rate by 75 bps (basis points) to a range of 1.5% – 1.75%, in a bid to control the surging inflation level, which has climbed to a 40-year high. But this hike was higher than the market expectations of a 50bps hike and the biggest hike since 1994.

The latest move by the Fed was followed by a half-point increase in May, which at that time was the biggest hike since 2000.

So, what can we expect from the upcoming Fed decision?

After June’s surging inflation report, market experts have started betting that the Federal Reserve might increase rates by as much as a full percentage point during its July meeting, scheduled this week. Traders had been expecting a rate hike of 0.75 percentage points, but the acceleration in consumer prices signals a higher rate increase for July.

The consumer price index increased 9.1% year-over-year in June, notching the hottest monthly figures since November 1981. The producer price index, which measures the prices received for final demand products, also climbed 11.3% year-over-year in June, which is also the highest reading since the record 11.6% increase during the month of March.

In case the US central bank increases rates higher than market estimates, it is expected to provide further support to the US dollar index, which already climbed to a new 20-year high recently. The greenback is also expected to strengthen further as China is announcing fresh restrictions to control the reported spread of the new Omicron subvariant.

Are you ready to take advantage of the Fed’s upcoming decision to invest in the US dollar?

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