S&P 500 remains rangebound ahead of massive FOMC decision. Fed expected to raise rates by 0.75%, eyes on SEP.
US equity benchmarks continue to hold their gains ahead of this afternoon’s Federal Reserve interest rate decision, with the S&P 500 trading higher by roughly 0.5%. Traders remain on edge as the Federal Reserve is set to raise interest rates while also releasing a new Summary of Economic Projections . Markets are currently priced for a 0.75% rate hike, which will take the federal funds rate to a range of 3-3.25%.
Risk assets are likely to be prone to volatility surrounding the statement release and press conference, as traders will need to digest the decision, a fresh SEP, and revised dot plots. The dot plot will be key, as it shows where FOMC members see interest rates in the months and years ahead. While not an “official” forecast, it offers a glimpse as to the potential future path of policy.
The last dot plot showed a 3.8% terminal rate for the FOMC, which is likely to be revised higher when the new dots come out. The repricing of Fed expectations could heighten interest rate volatility, which could then bleed into equity markets. Prior to the meeting, the 2-year Treasury yield climbed above 4% for the first time since 2007.S&P 500 futures sit finely poised ahead of this afternoon’s FOMC policy decision, with resistance at 3900 limiting upside so far.
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