The Fed's decision is the main event of the week - investors are awaiting Powell's statements

One of the key factors shaping the direction of financial markets this week will be the US Federal Reserve's (Fed) interest rate decision, which the central bank will announce on Wednesday.

Market participants widely expect the Fed to leave rates unchanged at this meeting. In September, the policy-setting committee raised the cost of borrowing for the first time since 2023, though uncertainty about the next move remains high.

While Fed officials continue to emphasize the need to bring inflation down to the 2% target, some of them see less urgency for an immediate rate hike. According to Deutsche Bank analysts, this is why investors' main focus will be on Fed Chair Kevin Warsh's press conference.

The bank's economists expect no significant changes in the official statement, though some committee members may dissent from the decision to hold rates steady. In their assessment, the Fed's overall message could remain hawkish: recent inflation data justifies further tightening of monetary policy over time, even if the central bank decides to hold off this week.

Expectations for a December rate hike remain high

According to CME's FedWatch tool, the market currently prices in roughly a 73% probability that the Fed will raise interest rates again in December, at the year's final meeting.

This expectation suggests that a possible pause at the current meeting does not signal an easing of monetary policy. For investors, what will matter most is how clearly Warsh signals the possibility of a rate hike in the coming months and how he assesses the latest inflation trends.

Besides the Fed, the European Central Bank (ECB) and the Bank of Japan will also announce their interest rate decisions this week. Both central banks are expected to keep their current rates unchanged.