June FOMC Statement – Crucial Event of the Day

The Fed is set for the largest rate hike in decades.

The Federal Reserve is expected to announce the biggest interest rate hike since 1994 on Wednesday after an alarming inflation report and a stock market meltdown upended the central bank’s plans.

Market consensus was for a 50bp interest rate hike. However, news websites are now saying 75bp.

A 75bp hike would be a technically and psychologically a big move – the largest one-time hike since 1994. How the U.S. dollar reaction will depend entirely on whether the central bank opts for a 50bp or 75bp move. For the Fed, the question is whether inflation conditions are alarming enough for a drastic move that would inevitably crush the equity markets and heighten the risk of recession next year.

Consumer prices hit a 40-year high in May, and the pain will continue as producer prices rise 10.8% year over year. Short- and long-term inflation expectations continued to climb, according to the June University of Michigan consumer sentiment index. Both the Federal Reserve and U.S. President Joe Biden have made fighting inflation a top priority.

Be ready at 21.00 GMT+3 for the FOMC Statement, followed by the FOMC Press Conference at 21.30 GMT+3.

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