Federal Reserve policymakers meet again on Wednesday, March 22nd at 22:00 GMT+4, to set its newest interest rate level. Expectations point towards an additional increase of 25 basis points bringing interest rates toward the 5% range.
However, what the markets are focusing most on is the target interest rate that the Fed considers sufficient to bring inflation back towards its 2% target.
The Fed will also be interested in the negative economic effects caused by rising interest rates Recent turmoil within the global banking sector is evidence of that, and fears are mounting that these damages could extend to other economic sectors.
The upcoming Fed meeting will therefore be different from previous meetings, as investors will be monitoring the Fed's reaction to the complex situation facing it.
The interest rate announcement will be followed by a press conference from Fed chief Jerome Powell and will be of great importance for markets.
Investors will monitor whether the Fed remains decisive about its final interest rate projections, or whether the central bank provides any hints relating to the end of its rate-raising cycle.
It will be difficult to predict the price movement coinciding with the announcement of interest rates and during the press conference. The market will move depending on the terminology Powell uses and how investors interpret that information. The expected scenario is for the Fed chairman to leave the door open to all possibilities, especially since inflation remains way above its 2% target.
We expect high volatility in markets following the decision before prices begin to stabilize. It is important to note 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, we advise our valued clients to:
- Track open positions with caution due to the possibility of price fluctuations throughout the day, without excluding any surprises of the price movement.
- Rely on the main support and resistance levels to follow the price movements by using charts within a daily timeframe, not relying on the intraday support and resistance levels.
Regarding analysts’ expectations, an indication of further interest rate hikes may provide support for the dollar, while acting as a tailwind for stocks, metals, and other currencies. However, any hints indicating the end of the Fed’s tightening cycle may be in favor of stocks and metals, while potentially putting pressure on the dollar.
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.