Fed to announce interest rate decision today: Markets may see volatility

The U.S. Federal Reserve (Fed) will announce its monetary policy decisions today. While market pricing almost certainly expects the Fed to keep its policy rate unchanged, signals from the policy statement and Powell's remarks are expected to influence the direction of the markets.

Analysts stated that recent macroeconomic data continues to fuel inflation concerns, noting that clues regarding how the Fed evaluates these signals are important for future steps.

Pointing out that these signals may be found in the "dot plot" and economic projections to be released by the bank, analysts also noted that the nuances in Powell's statements are significant for forecasts regarding when the first interest rate cut will begin.

FORECASTS POINT TO JUNE

Following the U.S. inflation data released last week, which came in higher than expected, the U.S. 10-year Treasury yield remains at the 4.30 percent level, while June continues to be the strongest probability for the Fed's first interest rate cut in money market pricing.

While investors in Europe appear cautiously positive ahead of the Fed's moves today, the interest rate decision to be announced by the Bank of England (BoE) on Thursday remains in focus.

Analysts noted that investors will be looking for possible clues regarding the ECB's future policies in the statements of European Central Bank (ECB) President Christine Lagarde today, adding that the busy macroeconomic data agenda to be released could also impact the direction of the markets.