After increasing interest rates by 75 bps at four consecutive meetings, the U.S. central bank should produce a 50 bps boost later in the day. Traders will then turn their direction to Thursday meetings of the Bank of England and the European Central Bank, where agreement is also for a 50 bps rate hike.
The euro climbed 0.2% versus the dollar to $1.06495. It was not far off a six-month intraday high of $1.0673 in the prior session following U.S. inflation figures.
The pound also struck a six-month high behind the U.S. data. It was up 0.1% at $1.2375, behind a brief drop when U.K. inflation data, too, delivered a sharper-than-expected decline.
Rising Consumer Prices
But year-on-year inflation of 10.7%, which corresponded to a forecasted 10.9%, stays painfully high for British consumers.
U.S. consumer prices increased less than anticipated for a second straight month in November. Meantime, underlying consumer prices are increasing by the least in 15 months.
That data supports existing expectations that the Fed will restrict the rate of its rate increases to 50 bps. So the main principle of Wednesday’s conference will be the Fed’s quarterly ‘dot plot.’ This indicates where policymakers expect rates to be at the end of each year, and comments by chair Jerome Powell.
An expansion in the median ‘dot’ for the level at the end of 2023 from the 4.625% projection at the end of September is widely anticipated. However, a critical question is how much it will increase.
