Fed Interest Rate decision and dot plot have huge market implications

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Federal Reserve Interest Rate Decision Preview: Dot plot has market attention – by FXstreetNews Fed CentralBanks EURUSD Macroeconomics

The market positioning suggests that such a decision is already largely priced in, opening the door for a significant reaction to the Fed’s communication, the revised Summary of Economic Projections and Chairman Jerome Powell’s press conference regarding future policy actions.

US stock index futures trade mixed following Tuesday's risk rally and the 10-year US Treasury bond yield continues to fluctuate above 3.5%. In December, the Fed’s SEP revealed that the median view of the policy rate at end-2023, the terminal rate, stood at 5.1%, up from 4.6% in September's SEP. At this point, an upward revision to the terminal rate projection shouldn’t be surprising. Having said that, where the terminal rate lands will reveal whether policymakers have turned reluctant to continue with rate hikes.

 

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