Before the Fed’s interest rate decision, eyes were turned to gold, foreign currency and the stock market. While the expectations are in the direction of 25 basis points, the FED is expected to increase once again this year.
What happens to gold and dollars if the Fed raises interest rates?
In case of an interest rate increase, the decision will directly affect the foreign exchange market. The effect in the foreign exchange market will be reflected in gold. If the FED raises interest rates, a rise in the dollar is expected, while gold prices will decline and be suppressed. On the contrary, when interest rates fall, the dollar depreciates in the short and medium term, and gold prices rise. Therefore, if the FED cuts interest rates, gold prices will turn the indicator up.
What happens to the stock market if the interest rate goes up?
Of course, stocks will also be affected by the Fed’s interest rate decision. When the Federal Open Market Committee announces a rate hike, investors can quickly sell their stocks and move on to less risk-free investments.
Since there is an inverse relationship between the interest rate and the stock market, it is expected that the stock market will fall in case of an interest increase. However, in times of turmoil in financial markets, investors may also see interest rate hikes as a step towards economic recovery. This, in turn, can bring purchases to the stock markets.
When is the Fed decision announcement?
The Fed rate decision meeting will be held on July 25-26. The interest statement will be made on the evening of July 26 at 21:00. On the other hand, FED’s year-end policy rate projection as 5.6 percent included the possibility of two rate hikes by the end of the year in the pricing.
