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Interest Rate Hikes Expected: FOMC Preview

Fed FOMC Powell Interest rates equity ES YM NQ

Depending on who you ask, you may get three or four different answers to the question: What are the biggest risks facing the market right now?

Those citing the trade war base their case on the impact tariffs have already had on the economy. Others might argue the looming government shutdown poses the most severe immediate risk. Yet another group of speculators might view the upcoming FOMC meeting as the next critical market challenge.

At the conclusion of tomorrows Fed’s meeting, an interest rate increase is expected to be announced as rates continue their steady rise back to a traditional level. This has been all but guaranteed at this point with most expectations staying above a 90% probability despite recent market volatility.

What will be most interesting to hear, and what will most likely move markets, is Federal Reserve Chairman Jerome Powell’s announcement during his press conference.

Powell will likely attempt to quell market volatility by stating that the Fed remains cautiously optimistic of the landscape and intends to raise rates in the coming quarters. The delivery of this message will be key as the market has been concerned about ‘over-tightening’ for some time.

If everything goes as expected, a brief period of high volatility will likely follow the announcement. This should subside relatively quickly as investors’ price in the new rates and move on to their next concern.

Those planning to trade during and following the announcement should have a clear and focused risk management strategy in case there are unexpected developments.

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