If US monetary authorities bring a surprise to the bond market, it will give a clearer view of how much more policy rates should be raised to stabilize prices.
The Federal Open Market Committee (FOMC), which announces the results on the 27th, raised interest rates by 75 basis points (bp, 1bp = 0.01%) for the second consecutive meeting, and the federal funds (FF) interest rate guidance target range is 2.25-2.5. It is widely expected to be%. The Overnight Index Swap (OIS), linked to the FOMC meeting dates, will factor in an additional 50bp rate hike in September and will turn to a rate cut in 2023 after the fed funds rate peaks around 3.4% in December. Is shown.
Market participants believe that this year’s rise in inflation is shocking for the FOMC and it is likely to avoid showing what it ultimately needs to settle prices. Federal Reserve Chair Powell is required to be flexible, and many transactions anticipate that interest rate volatility will remain high as a result.
The European Central Bank (ECB) stopped presenting forward guidance ahead of the FOMC. At a policy committee meeting on the 21st, it was decided to raise the rate by 50bp, which is twice the rate hike suggested by officials just a few days ago. Lagarde said the ECB would be “much more flexible” than ever before and would not give guidance on future rate hikes.
The results of the US FOMC meeting will be announced at 3:00 am on the 28th of Japan time, and Powell’s press conference will be at 3:30 am.
To be honest, I can’t predict which one the USD will react to after the FOMC. I don’t think I will provide clear forward guidance, but I plan to reconsider how the market will react to this after seeing the subsequent movements.