- Traders assign 92% odds to a 25 basis-point Fed rate increase at Thursday's policy meeting and are weighing whether it marks a one-off move or a new tightening cycle.
- A one-off increase is read as dovish or positive for equities, restoring Fed credibility under chair Kevin Warsh, while signals of more increases pressure stretched valuations amid a persistent oil crisis.
- Investors also brace for a likely borrowing-cost increase in Japan that can jolt capital flows, alongside central bank decisions in the US, UK and Japan.
Quotes
“A one-and-done outcome would allow the Fed to show that it is responding to inflation, respecting the message from markets and acting independently despite political pressure”
“It would also take some of the guesswork out of the remaining meetings this year.”