Fed policymakers meet again on the evening of May 3, 2023 at 10:00 PM Dubai time, for the Fed’s latest interest rate decision. Expectations call for an additional increase for the tenth consecutive time by 25 basis points, to reach the range of 5.25%.
What the market is focused on most is knowing the final target interest rate range, which the Fed considers sufficient to bring inflation back towards its 2% target.
At the same time, the Federal Reserve must focus on balancing its battle against inflation with the negative economic effects caused by high interest rates. Recent turmoil in the banking sector and the decline in GDP to 1.1% is the best evidence of this. There are fears that these damages will extend to many economic sectors, and it is up to the Fed to control inflation without dragging the economy into a severe recession.
The interest announcement will be followed by a press conference by the Fed chairman, Jerome Powell. This conference will, as usual, attract a lot of market attention.
The conference will therefore bring high volatility to the markets too. Predicting price movements and expectations coinciding with the event will be difficult. However, it all depends on whether the decision meets expectations, along with the terminology that the Federal Reserve chairman uses in his press conference, in relation to future interest rate policy.
According to analysts, expectations are as follows.
- Powell will leave the door open to all expected possibilities, especially since he considers inflation high despite its continued slowdown.
- The occurrence of new fluctuations in prices between high and low, and it will take some time before it begins to stabilize and take a specific path.
- Powell’s conference indicates further tighter policy, which may positively affect the dollar and negatively affect stocks, metals, and other currencies, according to analysts. However any hints indicating the end of the monetary tightening may be in favor of stocks and metals, and at the same time negative for the dollar.
Therefore, traders should remember that markets have different ideas and convictions in the way they interpret the information issued, and therefore prices cannot move 100% according to that information. Therefore, traders may wish to:
- Closely monitor your open positions for the possibility of price fluctuations throughout the day without excluding any surprises of price movement.
- Rely on the main support and resistance levels by using charts within a daily timeframe and not relying on the intraday support and resistance levels.
The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell. The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI. Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.