That will kick start the central bank bonanza this week, with the ECB and BOJ also still to come in the days ahead. Fed funds futures show that a 25 bps rate hike is fully priced in now and with little pushback, there should not be any major surprises by the Fed today. Here's a look at the curve:
As you can see, traders are still holding out on higher rates even after the setback from the softer CPI data as evident by the red line. This has also helped the dollar find somewhat of a footing in the past week.
The big question now for the Fed isn't about one or two more rate hikes. It is whether we are going to see them actually push for 6% rates or if the next two to three meetings is where the peak comes in on interest rates.
A lot of that will be data-dependent of course but essentially markets will trade and react based on the Fed's view and outlook accordingly.
At this juncture, they're sort of sitting right in the middle. But eventually, they will have to pick a lane and stick with that direction.
Unfortunately, for markets, that is not going to come today. All else being equal, we should see the Fed reaffirm that they stand ready to raise interest rates further if need be while acknowledging positive developments on the inflation front. The way Powell communicates that later will be key and that will be the trade in the aftermath of the decision in my view.