Markets anticipate a 25 basis point rate hike on Wednesday as the Federal Reserve shifts toward tightening to address inflation, with Morgan Stanley economists forecasting a second increase by December.
The Federal Reserve is expected to lift interest rates by 25 basis points this Wednesday, marking the first hike since July 2023. Traders currently assign a 90% probability to the move as the FOMC pivots to combat persistent inflation, a tight labor market, and crude oil prices exceeding $100 per barrel.
The Fed is responding to discouraging inflation data, a strong labor market, and energy price volatility driven by geopolitical tensions in the Middle East.