Currently, the Federal Reserve is conducting the FOMC meeting, with the interest rate decision expected to be announced at midnight on the 13th. The market currently expects a high probability of keeping rates unchanged, with more focus on whether Fed officials will lower interest rate expectations. In this regard, analysts at HSBC pointed out that the hawkish stance of the Federal Reserve may be a good entry point for buying risk assets.
The key point of the FOMC meeting is the dot plot on interest rates. HSBC analysts believe that the hawkish stance of the Federal Reserve presents a good buying opportunity. There is high uncertainty in the market regarding Fed information.
At the Federal Reserve’s interest rate decision meeting in early May, the federal funds rate was maintained in the range of 5.25% to 5.5%, achieving a freeze for the sixth consecutive time. The Federal Reserve is currently holding the Federal Open Market Committee (FOMC) meeting and is expected to announce the latest interest rate decision at midnight on the 13th.
According to the CME Group’s FedWatch data, the probability of keeping rates unchanged is as high as 99.4%. However, most analysts estimate that more Fed officials will lower their expectations for interest rate cuts this year, reducing the median number of cuts from 3 to 2 times, or even fewer. Therefore, the focus is more on the “dot plot” of interest rates.
In addition to the interest rate decision, the important inflation indicator, the U.S. Consumer Price Index (CPI) for May, will also be announced today at 20:30. Nick Timiraos, a journalist from The Wall Street Journal known as the “mouthpiece of the Federal Reserve,” stated that dovish and hawkish officials now agree to continue to observe. The CPI will determine whether the expected number of rate cuts this year will be one, two, or none at all.
Furthermore, HSBC analysts pointed out that there are some hawkish risks in this interest rate decision meeting. However, it is expected that the subsequent interest rate volatility is unlikely to return to the levels of last year, and the weak performance of risk assets will be temporary.
Therefore, the hawkish stance of the Federal Reserve may provide a good entry point for investing in risk assets. On the other hand, the Federal Reserve’s increasingly firm stance on suppressing inflation, with Chair Powell emphasizing bringing the inflation rate down to 2%, is causing pressure in the current high-interest rate environment. Nearly 300 banks in the U.S. face the pressure of bankruptcy, and consumers are forced to change their spending habits.