Wall Street placing its bets for a big Fed meeting and inflation reports
Next week, the Federal Reserve is set to hold its policy meeting, and while many believe that there will be no formal action, there will be stern talk about a commitment to bring down inflation. The prediction is that the latest inflation reading for May will be reported on Tuesday, during the two-day Fed meeting and will show additional progress in the fight against higher prices. The CME Group gauged that there is a 72% probability that the current fed funds rate will remain unchanged next week, and only about a 28% chance rates will rise, powering a broader stock market rally on Wall Street this month. While the vast majority of economists predict no change in rates next week, there is dissent. “Our expectation is for CPI to continue to show signs of disinflation and for this to lead the Fed to ‘pause’ and leave rates unchanged on Wednesday,” said Scott Ladner, chief investment officer at Horizon Investments.
The betting is also that the latest inflation reading for the month of May that will be reported on Tuesday, just as the two-day Fed meeting gets underway. After all, there’s a 72% probability that the current 5%-5.25% fed funds rate will remain unchanged next week, according to 30-day fed funds futures pricing data as gauged by the CME Group, and only about a 28% chance rates will rise.
FAQs
What is the Federal Reserve’s policy meeting?
The Federal Reserve’s policy meeting is a meeting of the Federal Open Market Committee (FOMC) to set monetary policy for the United States.
What are economists predicting will happen at the Federal Reserve policy meeting?
The majority of economists predict that there will be no formal action at the next FOMC meeting, but there will be stern talk about a commitment to bring down inflation.
What is the CME Group, and what are they saying about the fed funds rate?
The CME Group is a global derivatives marketplace. According to their 30-day fed funds futures pricing data, there is a 72% probability that the current fed funds rate (currently at 5%-5.25%) will remain unchanged next week, and only about a 28% chance rates will rise.
What is the consumer price index (CPI), and why is it important?
The consumer price index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is important because it is used to monitor inflation and price trends in the economy.
What are economists predicting for the inflation reading for May?
The prediction is that the latest inflation reading for May will show additional progress in the fight against higher prices.
What is Scott Ladner predicting will happen at the Federal Reserve policy meeting?
Scott Ladner, chief investment officer at Horizon Investments, predicts that the Fed will ‘pause’ and leave rates unchanged on Wednesday.
What is the stock market rally on Wall Street this month?
The stock market rally on Wall Street this month has seen the S&P 1500 regional bank index up by 10.2%, the Russell 2000 index of small-cap stocks has risen by 6.6%, and groups of S&P 500 energy, consumer discretionary, industrials and materials stocks are all up between 5.3% and 6.2%.
What happens if the inflation reading for May is higher than expected?
If the inflation reading for May is higher than expected, there may be a sharp reaction across most markets, with the S&P 500 possibly falling 2% to 3%, the Russell 2000 underperforming and the dollar strengthening.
What happens if the Federal Reserve raises rates next week?
If the Federal Reserve raises rates next week, the market sentiment may fluctuate, and volatility could surge in the coming weeks.
Wall Street Gambles on Major Fed Meeting and Inflation Reports
Wall Street is bracing for a Federal Reserve policy meeting next week, with analysts predicting no formal action and a commitment to bring down inflation further. While the current fed funds rate of 5%-5.25% is expected to remain unchanged next week, predictions suggest there is only a 33% chance rates will stay where they are by the July meeting. This view has helped drive a stock market rally, with most indexes experiencing upward momentum. However, the latest rally has raised concerns among investors, with some pointing out that most stocks are still in downtrends typical of bear markets. Analysts warn that Tuesday’s consumer price index report will give an indication of the Fed’s likely actions.