Markets on Edge: All Eyes on Today's Federal Reserve Interest Rate Decision

How will the Federal Reserve's decision affect the markets?

By Laila Eid | @Laila Eid | 22 March 2023

  • The possibility of a 25-point increase in the US interest rate has increased

  • A state of stability prevails over the global markets ahead of the Federal Reserve's decisions

  • The US dollar is stable near the 103.00 level

The markets are closely watching the Federal Reserve's decisions tonight

It comes at a time when the likelihood of a 25-point increase in the US interest rate is high, with probabilities reaching over 80%, according to the CME Group tool. But what concerns the markets is not only the decision to raise interest rates but also how the US Federal Reserve will be able to calm the markets about the potential banking crisis. At a time when fears and risk aversion dominate due to the possibility of a new global financial crisis, inflation rates continue to rise, and the US Federal Reserve has not yet succeeded in controlling price increases despite the strong monetary tightening measures it resorted to since last year. The Federal Reserve joined other central banks on Sunday to enhance liquidity through the permanent dollar swap system, after UBS Bank agreed to acquire Credit Suisse Bank. The markets will be waiting for any confirmation by the US Federal Reserve of its ability to contain the crisis.

The dollar is stable as preparations are made for the US Federal Reserve's decisions

The US dollar witnessed some relative calm and settled near the 103.00 level while waiting for the US Federal Reserve's decisions and their repercussions on the movements of the dollar against most currencies and commodities in the coming period. In the same context, gold trading stabilizes near the $1937 level per ounce after the significant declines it suffered after reaching the $2000 level per ounce.

European stocks decline as UK inflation rises more than expected

The Euro Stoxx 600 index rose 0.2%, with sectoral variation. Retail stocks rose while telecommunications stocks declined. A state of risk aversion increased after data released this morning showed an increase in inflation in Britain to unprecedented levels. The Consumer Price Index rose on an annual basis in February by 10.4%, confirming the Bank of England's failure so far to control inflation rates, although it was one of the first central banks to resort to a policy of raising interest rates to control price increases.