The attention of investors and markets focused late today on the meeting of the largest central bank in the world, the US Federal Bank, which began its meeting to discuss developments in monetary policy and interest levels yesterday, Tuesday, and its results will be announced today, as expectations indicate that the Federal Reserve will maintain its monetary policy and interest rates at current levels. 5.25% after a series of lifting operations that continued for ten consecutive meetings, at the fastest pace in four decades.

The last reading of inflation, according to data issued yesterday, Tuesday, by the Bureau of Labor Statistics in the United States of America, showed an increase in the Consumer Price Index (CPI), which measures inflation, by 0.1% in May, after an increase of 0.4% in April, while the main index that excluded food and energy prices came at 0.4%. With the same April reading, on the other hand, the annual index rose over the past 12 months to 4% from 4.9% in April, and the annual core index excluding food and energy prices rose to 5.3% on an annual basis in May from 5.5%.

The current inflation figures are low levels if compared to the peak levels recorded in July last year, amounting to 9.1%, and support a large percentage of the US Federal Reserve’s abandonment of its strict policy, especially in today’s meeting, but the Fed may keep the door open for an additional hike in July if prices return to rise again .

According to the estimates of futures markets from FedWatch issued by CME, the markets are priced to raise interest rates by 25 basis points at the Bank’s meeting on Wednesday, by 5%, compared to more than 25% yesterday, Tuesday, before the inflation figures, while the rate of keeping interest rates unchanged reached 95%.

In addition to the inflation numbers, the US labor market figures also came in support of the US Federal Reserve, after the economy added about 339,000 jobs in May, the unemployment rate rose to 3.7%, and the wages fell by 0.3% and 4.4% on a monthly and annual basis, respectively.

The bank’s interest decision on Wednesday, in addition to the press conference of the bank’s president, Jerome Powell, is accompanied by the bank’s members’ quarterly expectations for the future of interest rates, growth, and inflation, and what is known as the dot plot, which draws expectations for future interest rates, which will move the markets in the coming period.

expected movement scenarios

Raising the interest rate by 25 basis points will have a significant impact on market movements because until this moment it is not expected that the US dollar will rise and stock prices will decline in the initial reaction.

Keeping the interest rate unchanged, as expected in the markets, the dollar will move downward, and the stock and metal markets will benefit, but only as a preliminary reaction before the market separates the statement and listens to Jerome Powell in the press conference and the expectations of the Fed members for inflation, interest and growth.

One of the most important questions the Fed will answer today is…

Is this pause considered temporary and will the Fed return to raise in July? Especially since the markets are priced at 60% for an increase of 25% basis points in July.

How long will interest rates remain high?

Did the Fed discuss when to cut US interest rates?