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Vladimir Zernov
U.S. Stock Market

The Market Waits For The Fed Interest Rate Decision

S&P 500 futures lack direction in premarket trading as traders await the Fed Interest Rate decision and commentary from the Fed Chair Jerome Powell.

The Fed Interest Rate is expected to stay unchanged so the market will focus on the commentary. The Fed skipped the quarterly economic outlook in March as the situation with the coronavirus pandemic was just developing and there was too much uncertainty.

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Now, the Fed will provide its updated forecast which can have a material impact on stock price dynamics.

In addition to the forecast, traders will be searching for clues on whether Fed is set to continue its unprecedented monetary stimulus for many months to come.

In case the Fed hints that it will start to gradually reduce the monetary stimulus, the market may experience a material sell-off, while the opposite may cause a rally towards all-time highs.

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OECD Provides Gloomy Economic Outlook

While the market has risen to the levels seen at the beginning of this year, the economy will not be able to recover at the same speed.

The Organisation for Economic Cooperation and Development (OECD) has updated its forecast and now believes that the world economy will shrink by 6.0% in 2020.

OECD also expects a recovery of 5.2% in 2021 which means that the world will not get to its pre-COVID economic condition before 2022.

The forecast is even bleaker for the U.S. whose economy is forecast to contract by 7.3% this year before rebounding by 4.1% in 2021.

The above-mentioned projections are based on the assumption that the world manages to prevent the second wave of coronavirus. Forecasts get much worse in case the second wave of the virus becomes a serious problem.

Inflation Is Softer Than Expected

The U.S. has just released new data on Core Inflation Rate and Inflation Rate for May.

Core Inflation Rate was 1.2% year-over-year compared to analyst consensus of 1.3%. Inflation Rate was just 0.1% year-over-year while analysts expected it to be at 0.2%.

Imporantly, the month-over-month Inflation Rate is still in the negative territory at -0.1% compared to analyst consensus of 0.0%.

The data shows that demand remains weak and prices are under pressure.

For a look at all of today’s economic events, check out our economic calendar.

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