Beyond Fed’s expected hike, worries remain over pay and Putin

SOMETIMES, the stock market’s direction is decided by a single word change in the US Federal Reserve’s statements. This time around, billions of dollars may depend on the tone of the chairman’s voice.

The odds of Jerome Powell’s rate-setting committee resuming its rate hikes this Wednesday (Jul 26) – bringing rates to a near two-decade high of 5.5 per cent after a pause in May – are overwhelmingly high. Traders are also pretty confident about what Powell will say at his press conference: that the US central bank remains dependent on data and still sees signs of danger from inflation.

If Powell’s tone of voice betrays a feeling that the Fed has vanquished inflation and is merely awaiting confirmation from the data, stocks could take flight. If he exhibits any nervousness about an incipient rebound in food and energy prices, a big chunk of the bull-market gains could evaporate.