Global markets are today anticipating one of the most important economic decisions of this quarter: the US Federal Reserve’s interest rate cut decision, amid strong expectations that the central bank will cut rates by 25 basis points for the third consecutive time، All signs strongly suggest that the Fed will go ahead with interest rate cut، This also means that there may be several factors that could push rising inflation rates higher.

Why are expectations leaning toward a rate cut?

In recent weeks, markets have already begun pricing in a rate cut, following multiple indications from the Fed that declining employment data has become a higher priority than inflation at this stage. Although inflation has not yet reached the 2% target, the Fed views recent increases as temporary effects related to tariffs and expects inflation to return to a downward path in the near future.

How have markets reacted so far?

Signs of markets pricing in a rate cut have clearly appeared recently، which may be linked to various forms of Rising inflation:

US stock indices have seen consecutive gains supported by increased risk appetite.
Gold remains above $4,200 despite profit-taking.
The US dollar has broadly weakened against most major currencies.
All of this highlights how powerful the upcoming fed meeting outlook is in shaping various economic aspects.

All these movements reflect markets’ readiness for the most likely scenario: a rate cut، Therefore, Rising inflation must be taken into consideration.

The importance of tomorrow’s meeting: a quarterly meeting

Tomorrow’s Federal Reserve meeting is pivotal as it includes the release of the Fed’s updated economic projections as well as the Dot Plot, which outlines the expected path of interest rate cut in the coming periods. This information typically has the greatest impact on market movements after the rate decision itself، From the following, we can conclude the strength of the upcoming fed meeting outlook and its impact on various investment sectors.

The most sensitive point: Fed members’ voting

The level of agreement or division among Fed members regarding the rate cut will be an important factor in shaping market direction.

A unanimous or near-unanimous vote for a cut would give markets significant certainty regarding the Fed’s direction.
However, a clear division among members could lead to market tension due to a lack of clarity about monetary policy in the coming months.
Therefore, the outcomes tied to the upcoming fed meeting outlook will be highly impactful.

Expected impact on US stock markets

US stock markets will be at the center of attention this week, as the Fed’s decision may have a significant and direct impact in multiple directions، as it is noticeably influenced by the upcoming fed meeting outlook.

If a rate cut occurs and the Fed’s tone remains steady:
US stock markets are expected to react positively, especially technology and high-growth stocks. These companies typically benefit from lower borrowing costs, supporting their expansion and boosting future valuations. Clear guidance from the Fed on monetary policy also gives an extra boost to sectors sensitive to interest rate cut, such as real estate, automotive, and investment banks.
Major indices such as Nasdaq, S&P 500, and Dow Jones could experience new upward waves if the Fed’s general message supports growth and reassures about the inflation path.

If there is a clear division among members or a cautious tone in the statement:
Markets may face some pressure, as stocks tend to decline during times of uncertainty. Division within the Fed is often interpreted as a difference in economic outlook, prompting investors to reduce stock positions temporarily. Sensitive indices like Nasdaq may experience strong volatility, especially given technology stocks’ reliance on future rate expectations.
Any signal of economic slowdown or confirmation of persistent inflationary pressures could trigger limited short-term selling before markets calm down and reassess the situation after the Fed Chair’s press conference، It is certain that traders’ strategies will be affected by Rising inflation in such a situation.

Expected impact on gold, the US dollar, and the euro

Gold

Gold is expected to be among the biggest beneficiaries in the event of a rate cut, potentially moving toward breaking $4,250 and targeting $4,350. In times of uncertainty or Fed member division, demand for gold as a safe haven may increase، This raises the key question: will lowering interest rate cut become the main driver influencing gold investment?

US Dollar

A rate cut could further weaken the dollar against major currencies, while the dollar may benefit temporarily in case of stock declines or clear Fed divisions، Therefore, dollar traders are closely watching the outcomes of Today’s Federal Reserve decision.

EUR/USD

The pair is expected to move higher if the dollar weakens following a rate cut, especially after the European Central Bank stated it does not plan to cut rates in the near term. However, if US stocks fall or dollar demand rises, the pair could see limited downward movement، It is certain that lower interest rate cut will have a significant impact on dollar trading.

Tomorrow’s Fed decision will be the main factor in determining market direction over the coming weeks. Since the meeting includes updated economic projections and the interest rate cut Dot Plot, market activity is expected to be more dynamic than usual، as this meeting is expected to have a major influence on future investment activity, especially given the overall Impact of Fed decision on trading market.

We advise traders to manage positions wisely during the decision hours and follow live updates from our analysis team. This is why currency traders closely follow news of interest rate cut, as such changes have a major impact on all aspects of their trading activities.

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