Federal Reserve: 1 Thing All Investors Need to Know Before July 29
Institutions and investors mostly don't expect any change in interest rates, but that's not really the important thing.
Overview
Investors usually watch closely for potential changes to the Federal Reserve's federal funds rate because such changes can move markets. And that's certainly the case for the decision due on Wednesday, July 29. The Fed could curb high inflation by raising interest rates. But a rate hike could also wreck the already fragile U.S. economy.
When it's unclear what the Federal Reserve's Open Market Committee (FOMC) should do, the better choice is usually to do nothing rather than introduce a change that might upset the status quo. If nothing else, leaving things alone allows all of the economy's moving parts to continue finding the optimal way of functioning given the current backdrop.
Details
And that's what most traders are counting on this time around. According to commodities and futures exchange CME Group, the fed funds futures market is betting there's a 64% chance the FOMC will leave the fed funds rate at its current targeted range of 3.5% to 3.75%; there's only a 36% chance it will be raised to a target range of between 3.75% and 4%. Although doing nothing allows inflation to linger at uncomfortably high levels for at least a little while longer, standing pat is also less disruptive, which is arguably what the domestic economy needs more right now.
Source
Originally published at www.fool.com.