Mars Finance reported that on September 16, the Federal Reserve will announce its interest-rate decision and Summary of Economic Projections at 2:00 a.m. Beijing time on Thursday, and Fed Chair Kevin Warsh will hold a press conference half an hour later. Federal funds futures show a 92.5% probability that the Fed will raise interest rates by 25 basis points, with the target range expected to rise from 3.50% to 3.75% to 3.75% to 4.00%. If the hike is implemented, it will be the first rate increase since Warsh took office in May this year. US core CPI rose 0.3% month over month in August, while tensions in the Middle East pushed oil prices back above $100 per barrel. The market will focus on the decision’s vote split and the new dot plot to determine whether the minority position of only three officials supporting a rate hike in July has evolved into a broader policy consensus, and whether another hike will take place later this year. Compared with the 25-basis-point adjustment this time, Warsh’s comments on the subsequent interest-rate path may be more important. Wall Street institutions are mainly considering three scenarios: If the Fed raises rates by 25 basis points and signals that it will end the cycle after only one or two more hikes, US stocks may be able to digest the outcome, while the 10-year US Treasury yield could decline slightly; if the Fed holds rates steady but signals a rate hike later this year, the stock market’s initial rebound may prove unsustainable, long-term US Treasury yields could rise, and a weaker dollar could boost gold and physical assets; if the dot plot or post-meeting comments signal three or more consecutive rate hikes ahead, the 10-year US Treasury yield could break significantly above 5%, US stocks could fall by more than 1%, and the dollar could strengthen. Warsh is also facing dual pressure from the White House to lower borrowing costs and from rising bond-market yields. The market will be watching whether he can signal that the Fed will address inflation while preventing investors from interpreting this action as the beginning of a new cycle of sustained rate hikes.

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SecurityExtCollector

3 hours ago

It feels like what the market fears more this time is the phrase being interpreted as the starting point of continued rate hikes, so the wording needs to be scrutinized word by word.

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AvocadoYieldRate

4 hours ago

Warsh’s debut coincides with oil prices breaking above $100—this script is a bit tough to stomach.

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AlchemixAdept

4 hours ago

If the dot plot hints at three more rate hikes, risk assets may take three jolts.

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VolumeDetective

5 hours ago

First Review

Core CPI at 0.3% is not explosive, but it is not benign either; the odds of one or two more rate hikes this year are rising, and bond yields have already moved higher in anticipation.

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Probability of a 25-basis-point Fed rate hike reaches 92.5%; Wall Street outlines three market scenarios

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