A new week begins, with this week’s main focus on the rate-setting meeting.
At present, major institutions are all certain that there will be a rate hike this time, and the market is already trading on that expectation. Current conditions indicate that the probability of a rate hike is steadily increasing, but there are also many factors arguing against one.
The pressure is now on Warsh. I previously expected Warsh to withstand the pressure, but this time, both oil prices and the two forward-looking data releases have supported expectations for a rate hike, so I am starting to wonder whether Warsh might actually raise rates.
However, there are several possible scenarios even if rates are raised. The rate decision and the remarks at the subsequent press conference will have a major impact.
If rates are actually raised by 25 basis points in September but the possibility of further hikes is downplayed, then the decline that has already been priced in will leave limited room for a further pullback.
If a 25-basis-point hike is followed by stronger expectations of continued tightening, the market will face sustained pressure.
Conversely, if the pressure is resisted this time and rates are kept unchanged, the market will rebound. However, if the press conference takes a hawkish tone and emphasizes that subsequent rate hikes may be delayed, that will also have an impact. But I think this scenario is highly unlikely. If there is no rate hike in September, there will be even less chance of one in October, despite the sharp rise in oil prices in September.
Therefore, taking the market into account, I estimate the probability ratio between a bottoming rebound and a sustained decline at 6:4. I am more inclined to look for a low and bet on a long position. I expect Warsh to remain hawkish in rhetoric while keeping policy unchanged in action.
$BTC