Today the Fed's decision to raise, and investors are already thinking about cuts

The most important central bank in the world, i.e. the American one Federal Reserve, will announce today at 20 decision on an increase in interest rates. With a 75% probability, calculated on the basis of futures, the Fed will decide to move by 0,75 percentage points. This will make the rates rise to the range of 2,25-2,50 percent.

The market estimates the probability of a 1 percentage point hike as barely 25 percent. According to a survey by Bloomberg, there is little chance that the Federal Reserve would take such a step at any meeting.

Falling inflation will lead to rate cuts

According to market estimates and the Fed's macroeconomic projections, the peak interest rates it may fall out in the region of 3,5 percent. Therefore, at the next three meetings this year, there is room for increases on a total scale of 1 percentage point, and the cycle could end in December this year.

Moreover, the market begins to speculate that in 2023 there may be interest rate cuts, by a total of around 75 basis points. Inflation expectations indicate that the peak of inflation may already take place this summer. Then, until December this year. US price growth may drop to around 5%, and even lower in 2023, which could force the Fed to abandon its strict monetary policy.

Autumn of a weaker dollar and stronger cryptocurrencies?

With such assumptions, interesting returns could emerge in the bond, equity, and currency markets cryptocurrency. If the market is to discount the future ahead of the quarter or two, investors may start playing for interest rate cuts in the US already in August. This, in turn, could translate into a lower US dollar exchange rate, stocks could catch their breath, and bond prices could start rising. Autumn could then be more kind to cryptocurrencies.

However, it is likely that the Fed will not quickly abandon its hawkish rhetoric and will refrain from announcing the end of the interest rate hike cycle in order to continue to curb consumer demand, which contributes to the rise in inflation. This can be confirmed by the message of today's press conference Jerome Powell. The meeting of the Fed chairman with journalists will start at 20:30.