Forecast: The Fed will raise rates by 0.75% today.
Why?
1 - inflation came out higher than expected
2 - long-term inflation expectations in America have risen to 3%+, and this is already dangerous. This means that people begin to think that inflation is with us for a long time, behave accordingly and exacerbate inflation even more. This must be stopped
3 - on Monday, the Wall Street Journal and other media published articles that 0.75% will be seriously considered. Most likely, this is either inside information or a controlled leak in order to prepare investors a little.
Is 0.75% good or bad?
To fight inflation - good, for the economy - bad.
If, as a result, the rate increase will be not by 0.75%, but by 0.5%, then vice versa.
Both that option and the other options have a downside.
Therefore, we think that immediately after the meeting, the markets may well rally on the joys of the fact that the meeting is over. In addition, investors always find a dose of painkiller and sedative in Powell's speeches.
But tomorrow, as has happened more than once the day after the Fed, a downward reversal is quite possible, especially since a giant expiration awaits us on Friday, and this is always pain and hassle, so many will prefer to jump off in advance.
We will be buying aggressively in the S&P around 3500 on futures, but for now we will limit ourselves to fast trades.
1 - inflation came out higher than expected
2 - long-term inflation expectations in America have risen to 3%+, and this is already dangerous. This means that people begin to think that inflation is with us for a long time, behave accordingly and exacerbate inflation even more. This must be stopped
3 - on Monday, the Wall Street Journal and other media published articles that 0.75% will be seriously considered. Most likely, this is either inside information or a controlled leak in order to prepare investors a little.
Is 0.75% good or bad?
To fight inflation - good, for the economy - bad.
If, as a result, the rate increase will be not by 0.75%, but by 0.5%, then vice versa.
Both that option and the other options have a downside.
Therefore, we think that immediately after the meeting, the markets may well rally on the joys of the fact that the meeting is over. In addition, investors always find a dose of painkiller and sedative in Powell's speeches.
But tomorrow, as has happened more than once the day after the Fed, a downward reversal is quite possible, especially since a giant expiration awaits us on Friday, and this is always pain and hassle, so many will prefer to jump off in advance.
We will be buying aggressively in the S&P around 3500 on futures, but for now we will limit ourselves to fast trades.
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