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Following hawkish remarks by the US Fed Chair Jerome Powell at the Jackson Hole Economic Symposium earlier this month, the Federal Reserve is all set to announce its interest rate decision on Wednesday, September 21.
What has the Fed done so far to tackle inflation?
The Federal Reserve boosted the target range for the Fed Funds Rate by 75bps to a range of 2.25%-2.5% during its July policy meeting, its fourth rate hike in a row in a bid to combat rising inflation. The continuous increase in rates has sent borrowing costs to the highest since 2019.
What are the markets expecting from the US central bank?
Following the continuous surge in inflation, the annual inflation rate in the US eased to 8.5% in July, from its more than 40-year-high of 9.1% in June. The CPI also remained unchanged in July from the prior month, after surging to a 17-year high level of 1.3%.
However, the markets are still expecting a bigger rate hike of 75 bps at this week’s meeting, following hawkish remarks from several Fed officials recently. “Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said.
USD Prospects
The US dollar index jumped to a 20-year high recently, with the greenback also hitting multi-year highs versus the pound sterling and Japanese yen. However, the dollar has pared some gains ahead of the Fed interest rate decision due this week. The higher-than-expected rise in rates might provide some support to the dollar.
Get ready for the much-awaited interest rate decision by the Fed, which is expected to bring trading opportunities.
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