【Global Weekly Preview】| Global Markets Face "Super Rate Decision Week" as Fed Expected to Hold Rates Steady Thursday

Global markets over the past two weeks have been influenced by the Iran situation, and this week coincides with a “Super FOMC Week,” during which central banks around the world will hold monetary policy meetings. The most anticipated announcement is the Federal Reserve’s rate decision on Thursday, April 19th, at 2 a.m. Hong Kong time. On the US stock front, chipmaker Micron (NASDAQ: MU) will release its quarterly earnings after the market closes on Wednesday.

Probability of Rate Cut Less Than 2% This Week

According to the latest data from CME, investors expect the Fed to keep interest rates unchanged this week, with less than a 2% chance of a rate cut. However, investors are most focused on the post-meeting release of the dot plot and economic projections.

In January, interest rate futures indicated that the market priced in at least two rate cuts by the Fed this year. However, following US economic and inflation data, as well as the Middle East conflict that emerged in late February, the current pricing reflects only one rate cut this year, with about a 90% probability. Therefore, the dot plot after this week’s meeting will be a key indicator for market expectations on the direction of interest rates for the rest of the year.

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Additionally, after the Strait of Hormuz oil transportation disruptions, crude oil prices have risen over 40% in the past two weeks. Besides causing global oil supply disruptions, markets are also worried about inflation driven by high oil prices. Therefore, how the Fed views inflation and Chairman Jerome Powell’s comments during the press conference regarding oil prices and the US economy will be crucial.

On the other hand, major central banks such as the European Central Bank, Bank of England, and Bank of Japan will also hold monetary policy meetings this week. The energy inflation caused by oil and natural gas shortages has raised concerns about whether the ECB will need to restart rate hikes; meanwhile, the Bank of Japan is in a rate hike cycle, but Prime Minister Fumio Kishida’s continued pursuit of loose monetary policy and the outlook of BOJ Governor Ueda Kuroda will also attract attention.

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