**ASX Set for Decline as Investors Eye Federal Reserve Interest Rate Decision**
*Based on original reporting by Jessica Sier, Australian Financial Review.*
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Global equity markets are facing heightened volatility as investors await the latest US Federal Reserve meeting and its consequential interest rate decision. Australian shares are poised to fall, following losses on Wall Street amid renewed concerns about inflation, economic growth prospects, and the future path of interest rates.
## Key Highlights
– The ASX 200 is expected to open lower, tracking declines in US stock benchmarks.
– The Federal Reserve is widely predicted to hold rates steady but may signal a hawkish stance.
– Australian dollar trades lower against the US dollar, reflecting global risk aversion.
– Commodity prices are mixed as investors recalibrate global growth expectations.
– Bond yields have surged ahead of the Fed announcement, tightening financial conditions.
– Investors are parsing global economic signals with increasing caution.
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### Overseas Market Performance
US markets closed in negative territory as investors braced for the Federal Reserve’s rate policy decision, with the S&P 500, Dow Jones Industrial Average, and Nasdaq all recording losses. The Dow Jones fell 0.7 percent, the S&P 500 lost nearly 0.8 percent, and the tech-heavy Nasdaq dropped 1.0 percent. This broad-based selloff highlights investor anxiety over interest rates remaining elevated for longer than previously anticipated.
European equity markets mirrored the cautious tone, with the FTSE 100 in London and the Euro Stoxx 50 indices falling. Asian markets, including Hong Kong’s Hang Seng and Japan’s Nikkei 225, also ended their sessions lower, impacted by global monetary policy uncertainty and slowing growth in China.
### Federal Reserve Meeting in Focus
All eyes in global financial markets are on the upcoming decision from the Federal Reserve’s policy-setting Federal Open Market Committee. Most economists and investors expect the Fed to keep its benchmark interest rate unchanged in the 5.25 to 5.50 percent target range. However, the market remains on edge over future guidance, particularly regarding the possibility of another rate hike later this year.
Key factors influencing Fed policy:
– Recent data revealed that US inflation, while moderating, persists above the Fed’s 2 percent target.
– Labour market indicators remain robust, contributing to concerns about wage-driven inflation.
– Bond markets have experienced a sharp uptick in yields, the 10-year Treasury recently breaching 4.35 percent, its highest level since 2007.
### Potential Scenarios Post-Fed Meeting
Analysts see a number of possible outcomes from this key central bank decision:
1. **Steady Rates with Hawkish Signals:**
The Fed could hold rates steady but reiterate its commitment to fighting inflation, suggesting that at least one more hike remains possible this year.
2. **Adjustment to Economic Projections:**
Updated economic and interest rate projections may show a median outlook for fewer rate cuts in 2024 than markets anticipate.
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