Fed Hike Expected This Week, Market Reaction Depends on Statement and Press Conference

The Federal Reserve's interest rate hike is widely expected this week, but market reaction will depend on the Fed's statement and press conference. According to CME FedWatch, traders are pricing in a 92% chance of an interest rate hike, with 86 out of 101 economists polled by Reuters expecting rates to rise to 3.75-4.0%. The median inflation projection for 2027 is expected to be above 4.0%, which could lead to a sustained interest rate hiking cycle.

During the press conference, traders will be watching for Chairman Warsh's answers to three key questions: what would prompt another hike, why they hiked this time, and how to interpret the dot plot. A dovish or noncommittal takeaway from the Fed could boost the EUR/USD pair back toward 1.1600, while a strong 'hawkish hike' interpretation could lead to EUR/USD testing 1.1500 support.

The FOMC meeting will conclude on Wednesday at 2:00 ET, with Chairman Warsh's press conference beginning at 2:30 ET. The Summary of Economic Projections (SEP) will be released during the meeting, which includes the dot plot and economic projections for 2026 and 2027.