Fed's Economic Forecasts in Focus as Rate Increase is Almost Fully Priced
Taking into account the fact that the markets almost fully appreciated today's Fed rate increase, investors will be waiting for new economic forecasts. Market participants will also closely monitor new hints about the further monetary and credit policy of the bank. Earlier, the central bank pointed to three rate increases this year, but with rising inflation and a steady economy, the fourth rate increase is quite realistic.
If the Fed signals about fourth hike this year, it could trigger some near term strength for the US dollar. It could also lead to a further flattening of the yield curve which has caused some traders concern as it has been associated with recession warnings.
The British pound is trading lower after release of inflation data. Inflation in the UK held steady at one year lows in May, further diminishing the chances for a rate hike by the Bank of England in the coming months. The Office for National Statistics (ONS) reported that the annual rate of inflation rose by 2.4% in May, unchanged from the previous month. On a monthly basis, consumer prices rose 0.4% in May, unchanged from a month earlier and in line with forecasts.