All eyes on Fed interest rate decision amid recession fears

All eyes are on the US Federal Reserve's interest rate decision to be announced on Wednesday amid fears of recession.

Many investors fear that the Fed’s aggressive monetary policy could push the American economy into a recession, which caused a major sell-off in the markets in recent weeks.

After raising interest rates by 25 and 50 basis points in March and May, respectively, carrying the target range for the federal funds rate to 0.75%-1%, the Fed is widely expected to deliver a 50-basis point rate hike at the conclusion of its two-day meeting on Wednesday.

Some Fed officials in recent weeks also signaled the possibility of a 75-basis point rate hike in September as consumer inflation hit 8.6% in May – the highest annual gain since December 1981.

According to experts, Fed is signaling that it is going to be even more aggressive in raising interest rates this year in order to tame record-high inflation.

Due to the Fed's higher rate hike expectations, the US stock market last week recorded its worst weekly performance since January. On Monday, the Dow Jones Industrial Average fell 2.8% with a massive 876-point loss. The S&P 500 lost 3.9%, while the tech-heavy Nasdaq dove 4.7%.

The value of the cryptocurrency market, which has been highly correlated to the Nasdaq in recent months, plummeted below $1 trillion on Monday – a level not seen in 17 months.

Meanwhile, the European Central Bank’s Governing Council will hold an unscheduled meeting to discuss current market conditions.

Despite the high inflation, the ECB did not change the interest rates in line with the market expectations, while it gave the signal for an increase in interest rates in July and September.