The Fed could deliver the final rate hike of a historically aggressive cycle today. Here’s what to know.

All eyes are on the Fed today as officials ready their decision on what could be the final rate hike of the cycle

As of last night, traders assigned a 82% probability to a 25 basis-point increase, while they see an 18% chance of no change at all. 

We’ll hear from central bank chief Jerome Powell today at 2 p.m. ET, shortly after the policy announcement. 

Below, we’re covering everything to know for the big day.

1. Central bankers convened Tuesday to kick off their two-day meeting that everyone expects to culminate in a quarter-point hike that would bring the Fed’s benchmark rate to a range of 5.0%-5.25%. 

The last time the fed funds rate hit that level was during the housing boom in 2006, in the run up to the 2008 crisis.

Broadly, markets are acting as if today’s potential rate hike will be the final one of the Fed’s lengthy, aggressive cycle that’s brought so far nine consecutive raises, the last of which was a 25 basis-point move in February.

Still, for the past several Fed meetings, Jerome Powell’s signaled the opposite of what markets have indicated they’re expecting. 

The thing to watch today is whether Powell gives any hints as to what comes next as far as policy and whether he makes any reference to rate cuts to come later this year. 

Inflation is sticky, and remains well above the Fed’s 2% target, while the labor market is still showing signs of strength. 

The April jobs report, which is due Friday, could show further cooling, but if it’s hotter than expected that could keep Powell and co. committed to their path of keeping policy tight. 

But after the third regional bank in eight weeks fell and was put under regulatory control, some analysts say there’s plenty to warrant a pause, and that the Fed’s moves over the last year have caused enough pain. 

It is possible, experts argue, that bank stress is doing the Fed’s job for it, and that Powell should sit back and wait to see how things unfold for the economy. 

“The whole 2% [inflation] target is an absolute trap,” 40-year market veteran Barry Knapp said Tuesday, adding that bank deposits could plunge and financial conditions could tighten further.

“If credit drops that much, we’ve got a real, huge economic problem on our hands,” Knapp said. “The market is telling you, in terms of forward yield curves, that they expect the Fed to make a mistake.”

And as far as the stock market goes, Morgan Stanley’s Mike Wilson said an overly-hawkish central bank this week could end up dashing optimism for investors, and a sell-off could ensue.

Equities could face a “near-term negative surprise” if Powell’s comments suggest more staying-the-course for the Fed, Wilson told clients this week.

But from Fundstrat’s perspective (typically a more bullish view on Wall Street), the S&P 500 faces a make-or-break moment this week that could actually push it toward all-time highs. 

“This will likely be the last hike of the cycle,” Fundstrat’s Tom Lee said. “This is thesis changing.”

2. US stock futures rise early Wednesday, as investors await the Fed’s latest policy decision. The S&P Global US Services PMI data for April is also due later this morning. Check out the latest market moves.

3. On the docket: PepsiCo, QUALCOMM, and Gilead Sciences, all reporting.

4. Morgan Stanley warned that a strong earnings season is giving investors a false sense of security. Strategists said these 20 defensive stocks have the stability to bolster a portfolio as a downturn approaches.

5. Housing affordability continues to drop this spring. Mortgage payments for applicants jumped over the course of March, increasing 1.6%, while home prices remained elevated. Here’s your housing market update.

6. Apple’s new high-yield savings account offering a 4.15% yield attracted $1 billion in deposits within four days of launching. Customers opened more than 240,000 accounts in the days after it became available — and that only represents 0.002% of total US iPhone users.

7. The short seller that took on Asia’s richest man has a new target. Hindenburg Research just unveiled a short position against Carl Icahn’s conglomerate. It claims that the Wall Street legend’s empire is propped up by “ponzi-like” structures.

8. Meet Julia Lemberskiy, a 30-year-old, financially independent real-estate investor. She has a simple approach when it comes to landing in the right markets and identifying undervalued areas for properties — and her buying strategy starts with one simple question.

9. The CEO of BiggerPockets explained why real-estate buyers should have a healthy fear of the market right now. Investors are shunning the once-popular “BRRR” strategy these days, according to Scott Trench. He shared what to focus on instead.

10. Shares of education company Chegg tumbled 49% on Tuesday. It said the rise of ChatGPT among students is impacting customer growth, and that trends suggest more students will continue to turn to AI language processors. 

Source: I N S I D E R

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