Will the Fed end the rate hikes? What will the week bring?

The dynamic breaking of the support by the US dollar index last week showed the strength of the dollar bears. At the moment, the attention of market participants is focused on Federal Reserve, which will take another monetary decision on Wednesday, July 26. Will the Fed really end the cycle of interest rate hikes in the United States?

US inflation is falling. What will the Fed do?

At the beginning of last year, CPI inflation in the US exceeded 9% - currently, the same indicator has fallen to the level of 3%. Looking at this variable alone, price increases in the US are becoming less of a problem. But are you sure? Russia's aggression against Ukraine has made the situation on the oil market extremely tense. The record prices of the raw material meant that Americans were paying more than 5 dollars for a gallon of gasoline. The drop in crude oil prices in the global markets contributed not only to a drop in prices at petrol stations, but also to a decline in the dynamics of inflation itself. However, according to forecasts, this situation may change.

The current cycle of Fed hikes has translated into the most dynamic increase in interest rates in the United States in history. Despite the decline in inflation and relatively good economic data, the market is almost certain that the Fed will raise rates again at Wednesday's meeting.

Similar expectations are formulated for EBC, which will take its monetary decision right after the Fed - on Thursday, July 27. Currently, the market assumes two more interest rate hikes in the euro zone this year. Nevertheless, the probability of the second hike is estimated at 63%, so one can expect that the period between ECB meetings will be full of volatility of forecasts regarding further moves of the European Central Bank.

In today's webinar:

• What will the Fed do?
• Will the ECB follow the footsteps of the Fed?
• A mixed start to the earnings season in the US

About the host

Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.

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