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#199: Fed's in 24 hours - cast your vote!
The ECB (European Central Bank) and the Fed (US’ central bank) have pretty much been raising interest rates in parallel for almost 14 months
Last Thursday, the ECB hiked rates by another 0.25% for its September meeting, and it was quite hard to foresee as the market participants’ views were divided
Now we got the Fed at 2PM on Wednesday. Will it be a hike or a pause?
In Europe Last Week
Last Thursday, ECB (European Central Bank) raised its key interest rate to 4%, a record high
ECB president Lagarde has signaled that the hike, its 10th in a 14-month-long fight against inflation, was likely to be its last
But this was a hard one to predict -- per a Bloomberg survey, economists were almost evenly split between last Thursday being a hike (.25% interest rate increase) and pause (no change)
On the market's side, traders priced in a 40% chance of a hike
Now on to the Fed (US)
Above is what the market’s seeing for tomorrow (from CME FedWatch Tool)
Notice that at the bottom right of the screenshot up there, a month ago, the market was seeing 89% of a pause (no hike) for tomorrow
We’re now at 99% probability of a pause tomorrow
So, there's more consensus for the September Fed meeting than there was for the ECB decision -- the focus now is on Powell's comments tomorrow and the SEP (Summary of Economic Projections)
The SEP gets released every other meeting — We last had it in June (two meetings ago), when the SEP included a projected terminal fed funds rate of 5.6% (we’re at 5.25~5.50% now)
Now, I’m curious…
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