The Fed has to walk a fine line Wednesday. How the stock market may react, according to JPMorgan
The messaging Fed Chairman Kevin Warsh issues at the press conference could have a large effect on how equities respond.
TL;DR
- The Federal Reserve is expected to raise interest rates at its policy meeting, a shift from earlier expectations.
- Rising inflation and energy prices are pressuring the bond market and hurting stocks.
- JPMorgan has identified five possible scenarios for the stock market's reaction.
- Scenarios include a 'no hike,' a 25 basis point hike with no guidance, a hike with revised rate cut timelines, a hike with implications for a higher neutral real interest rate (R-star), and a hike focused on aggressively curbing inflation.
- The market's response will depend on the Fed's decision and the messaging from Chairman Kevin Warsh.