09.06.2023 04:20 PM
What is the probability of a rate hike suspension?

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The latest data on unemployment claims in the United States shows a slowdown in the labor market, which means the U.S. economy is contracting. These data support a pause in the Federal Reserve's rate hikes at the next FOMC meeting on June 14.

According to the CME FedWatch tool, there is a 73.6% probability that the Federal Reserve will pause the rate hike at the upcoming meeting. This report and its consequences have had a noticeable impact on the U.S. dollar and precious metals. The dollar has lost 0.765%.

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Now, in light of the increase in unemployment in the U.S., the Federal Reserve will focus on the upcoming inflation report, which will be released Tuesday, June 13, the first day of the FOMC meeting. Since the PCE price index represents a diversified analysis of a wide range of consumer expenses, it excellently reflects changes in consumer spending behavior. Therefore, the PCE price index is the preferred indicator for the Federal Reserve to measure the current level of inflation.

The PCE price index will reflect inflation for May. And if inflation decreases or remains stable, it will contribute to a pause in rate hikes. According to the opinions of many analysts, the Federal Reserve will keep the base rate at a range of five to five and a quarter point.

However, currently, the CME FedWatch Tool shows a 34.6% probability that the Federal Reserve will keep the current rates and a 51.6% probability of raising rates by a quarter percentage point at the July FOMC meeting.

Irina Yanina,
Analytical expert of InstaForex
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