All market participants including financial experts and economists await Friday’s PCE report. They also believe the Federal Reserve system will slow down the interest rate hike.
The financial markets are trying to get in front of the upcoming release of the core Personal Consumption Expenditure (PCE) report that will be released by the Bureau of Economic Analysis on Friday. It will contain the most crucial and actual data about inflation for December.
Currently. Experts estimate it as a continued decline featuring the core inflation between 4.7% and 4.4% in November and over the last month respectively.
| FOMC Meeting Date | Rate change (bps) | Federal Funds rate |
|---|---|---|
| Dec 14, 2022 | +50 | 4.25% to 4.50% |
| Nov 2, 2022 | +75 | 3.75% to 4.00% |
| Sept 21, 2022 | +75 | 3.00% to 3.25% |
| July 27, 2022 | +75 | 2.25% to 2.50% |
| June 16, 2022 | +75 | 1.5% to 1.75% |
| May 5, 2022 | +50 | 0.75% to 1.00% |
| March 17, 2022 | +25 | 0.25% to 0.50% |
Declining inflation is definitely welcome news for investors and markets. However, it is not the time to celebrate, as we still need to wait for the FED to decide on the interest rate hike pace and size. It is hard to predict how the situation will keep going, market participants have been receiving mixed messages from the FED participants.
Moreover, the majority of experts expect the rate to increase by ¼%. If so, it is going to be the first hike since the earlier one back in March. Since 2018, the rate has been maintained between 0 and ¼% by the Federal Reserve.
It was extended in March after another ¼%-hike. Later, we have been seeing several more aggressive moves featuring ½ a percent increase in May followed by 4 consecutive hikes of ¾% taking place between June and November.
December was quite an ease with only a 0.5% hike. As a result, the overall hike took the inflation rate from 0 to 4 ¼-4 ½%.
Market participants expect the Fed to slow down the inflation rate hikes by the end of January after the FOMC meeting. What’s more, most experts are sure that the rate will be raised by not more than ¼% although the minority of economists still believes it can increase by 0.5%.
Anyway, investors will see how the markets are going to move by the end of this week. Make sure not to miss potentially profitable trading opportunities!
May the trading luck be with you!
