What will happen next?
On Monday, the US stock market has gone up.
The Dow Jones, the Nasdaq and the S&P 500 reported a profit of 0.52%, 0,19% and 0,40% respectively.
Traders are sure there will be no recession and are confidentially investing in the stock market.
On the next monetary policy decision, the Federal Reserve will update the public on Wednesday 26 July.
It is expected by the majority of economists, an interest rate increase of 25 basis points, that will bring the benchmark federal funds rate to 5.25%-5.50%.
The question that every investor has at the moment is: what will do the Federal Reserve after the most anticipated rate hike of tomorrow?
The possible scenarios are the following:
- the Federal Reserve continues raising interest rates once again this year
- or pause and keep the high rates for a longer period than the market expected
In June, the Federal Reserve paused, for the first time its interest rate hikes, after 10 consecutive increases to combat high inflation.
The goal of the restrictive monetary policy is to raise the cost of borrowing and, at the same time, to lower the prices of the asset classes in order to slow the economy.
Inflation, in the US, has shown a clear sign of a slowdown, in fact, last month reached the 3% level while it was at 9.1% in June 2022.
However, since the inflation target of 2% has not been reached yet, the Fed has still some work to do and the consequences of its actions are unpredictable.
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