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[Fed Rate Decision Preview: Opinions Divided] ⑴ The market expects the Federal Open Market Committee to raise the target for the federal funds rate by 25 basis points this week, but some experts believe that a rise to the 3.75% to 4% range is not a certainty. ⑵ One strategist pointed out that stronger-than-expected core services inflation has exacerbated concerns about the potential spread of price pressures, reinforcing the rationale for a recent policy response, but he does not expect aggressive tightening. ⑶ This strategist stated that short-term Treasury yields have already signaled the need for policy to move upward, but the spread between the 2-year yield and the federal funds rate shows that the Fed is not significantly lagging behind the curve; the benefit of a weaker bond market is that short-term yields have already reflected expectations of further tightening, so even if the Fed acts, there is no need for a significant further increase. ⑷ He also believes that tightening may support long-term bonds, as this strengthens the credibility of the Fed's efforts to combat inflation. ⑸ One chief global strategist stated that the focus of the debate is no longer whether to act this week, but how many rate hikes this round will occur, and he expects the Fed will not end the cycle in one go. (6) This strategist believes that the midterm elections mean that October may see no change in interest rates, with December being the most likely window for subsequent rate hikes. As long as growth and earnings remain strong, risk assets can absorb two to three rate hikes, but if inflation becomes more stubborn, forcing the Fed to extend its tightening cycle, the outlook will be significantly more challenging. (7) An institutional investment strategy head believes that inflation data reinforces the basis for recent rate hikes, but will not be a major driver for risk assets. (8) A co-head of fixed income strategy stated that the Fed may need to tighten several times to truly curb inflation, and the longer the Fed waits, the more the bond market will push up yields to complete the tightening for it. (9) This person stated that Treasury yields should remain high until investors are confident that inflation is sustainably falling towards its target, and the path of the 10-year Treasury yield moving towards 5% remains valid. (10) A chief global strategist believes that credibility is another reason for rate hikes. In the absence of forward guidance, market consensus has converged on a rate hike this week; without action, the Chairman and the Committee will severely lose credibility. (11) It is expected that as growth and inflation cool in 2027, the Federal Reserve may hold rates steady in October, and raise rates once more or not at all in December, which should limit further increases in long-term yields. (12) Some chief economists predict that the dot plot will show the committee's increased determination to continue raising rates, and this may continue next year; others believe that if the credibility of rate hikes is restored, short-term yields will rise while long-term yields will stabilize. If the 10-year yield breaks through 5%, it indicates that the market believes one or two actions are not enough.