The Federal Reserve will announce its monetary policy today, Wednesday, in the American session, in its meeting, which began yesterday, Tuesday, in the first meeting of 2022.

The US Federal Reserve has stressed and emphasized in recent weeks the danger of inflation, which has reached its highest levels since 1982, and that it must be fought, as it has been overwhelmingly confirmed that it exceeds 94% that the Fed will raise interest rates at the March meeting as the first process to raise interest rates since 2015 and that it will be raised by three to four times During the year it will usually be in June, September and December.

So the process of tightening monetary policy and starting to raise interest rates in March is something that has been confirmed, but the question is whether we will witness additional tightening, as Goldman Sachs mentioned that there is a possibility that the Fed will move in all the remaining meetings during the current year, which means seven moves, and if we exclude one meeting to announce Starting to reduce the budget, we will have six rate hikes, according to a report published by Goldman Sachs.

Attention will be watching Jerome Powell and the questions of the press conference and will often focus on these questions, which is to what extent the US Federal Reserve is ready to go to stop high inflation, as the markets have already priced in the current figures, raising them by three to four times, and accordingly, any expectations of an additional interest rate hike may support additional market movements.

Expected scenarios

Some expectations indicate that the Federal Reserve may raise interest rates by half a point in March, which is unlikely for the moment, but if the Fed hints at it at Wednesday’s meeting, the markets will start calculating it and vice versa if Powell is denied.

Some expectations also indicate that the Federal Reserve may announce the end of the bond purchase program suddenly and early this week, and raise interest rates by a quarter point today, which will also be a strong surprise to the markets.

The most expected scenario in the markets today is to keep monetary policy unchanged and the implicit announcement or hint that the Fed will raise interest rates in March to control high inflation, with an emphasis on a total of 100 basis points, i.e. 3 times except for March during the current year, and accordingly the US dollar will decline due to Because this scenario is calculated at current prices.

If Powell indicated that inflation is a real danger and it must be dealt with more stringently and that the Fed may resort to raising interest rates more tightly by more than 4 times, the US dollar is expected to rise against all major currencies.

Central Bank of Canada

The Bank of Canada will announce its monetary policy also today, a few hours before the US Federal Reserve, where expectations indicate that the bank will keep its monetary policy unchanged in its first meeting this year and keep the current interest rates at 0.25%.

The Bank of Canada ended its bond-buying program at last October’s meeting and expressed its intention to begin tightening monetary policy, especially with inflation reaching its highest level in 30 years in December.

Some market expectations and opinion polls see that Canada may surprise the markets and raise interest rates in next Wednesday’s meeting, especially after the latest inflation reading issued last week, as the markets are pricing in an opportunity of more than 40% to raise interest rates by a quarter point today.

We expect the Bank of Canada to postpone raising interest rates until its meeting on the second of next March, and that the hikes will continue this year to more than three times.

motion scenarios If the bank decides to raise interest rates by a quarter of a point today, the Canadian dollar will trade positively and the US dollar pair will decline against the Canadian dollar.

In the event that monetary policy remains unchanged, the pair is expected to rise and move afterwards based on the movements of the US dollar after the Fed meeting.