The key US stock market indices - Dow Jones, NASDAQ, and S&P 500 - ended Tuesday with a new fall and a new update of their local lows. In general, everything continues to go according to the plan that we announced a few months ago. The Fed does not even think to disown its plan for aggressive tightening of monetary policy, and inflation, because of which the regulator is going to raise rates quickly and strongly, does not even think to react to the Fed's actions in any way. Recall that by the end of May, the consumer price index in the United States accelerated again and provoked collapses in the cryptocurrency and stock markets, since now everyone understands that if a rate increase to 1% could not even stop the growth of inflation, then more aggressive actions need to be taken. And this means that the rate can rise faster and stronger. This is why the US dollar has grown significantly in the last few days against its main competitors.
The basic scenario, which has already been fully taken into account by the markets, assumes an increase in the key rate by 0.5%. However, on Monday, Barclays Bank announced that the rate could be increased by 0.75% due to the continuing inflation. After that, all major banks and analytical agencies began to provide their forecasts, which include both a rate increase of 1% at once and several rate increases of 0.75% in a row. One thing is clear to everyone - the Fed will have to act more harshly if it wants to stop the acceleration of price growth. It is "stop the acceleration", there is no question of slowing them down now. Therefore, now the question is as follows: will the monetary committee go according to the "Bullard plan", which a few weeks ago called for raising the rate to 3-3.5% as quickly as possible, and then slowly reduce it? Given how the risk asset markets have collapsed and how much the dollar has strengthened, we do not exclude that almost any scenario from the Fed has already been worked out. Nevertheless, it is impossible to say this with certainty. The Fed may present one or even several surprises tonight, and it doesn't even make sense to guess how the markets will react to them. Recall that such a situation has repeatedly arisen when the market moved in the opposite, illogical direction. Today, we can also see something similar. Thus, in general, the US stock market will continue to adjust in almost any case. Today's Fed rate hike, whatever it is, will not be the last. This means that monetary policy will be tightened in any case. Plus, from July 1, the QT program will start working, which assumes a significant reduction in the money supply in the American economy and is the antipode of the quantitative stimulus program.
