**♻️ PRE MARKET ANALYSIS ♻️
⭕ Fed Hike, Then What?
👉 There is a pretty strong consensus that the Fed will hike by a quarter of a point at the next meeting. But recent data shows that there remains a significant amount of price pressures, which could leave the Fed still signaling that more rate hikes could be coming.
⭕ The preferred measure of inflation for the Fed is the core PCE change. That has remained consistent since December of last year at, or slightly above, 4.6%. That’s more than double the target of 2.0%, but more importantly, it’s not coming down. Meaning that the Fed can interpret it as there is a need for more hiking to get inflation back in line.
🛑 What the Fed fears the most at the current juncture is initiating a pause, and then seeing inflation rise again. Which would force them to raise rates at a faster pace to control inflation.
⭐ They would see this as losing “credibility” in the fight against inflation. The Fed believes that inflation is controlled by expectations, so pausing at the “wrong” time is a major concern. That could incline the scales in favor of another rate hike and keep the door open for rate hikes after that.
👉 But, such a stance would likely be interpreted as “hawkish” by a market that’s pricing in a pause followed by rate cuts later in the year.**