In a packed Wall Street week, the headlining act arrives. The Federal Reserve releases its decision on interest rates this afternoon with a hike of 75 basis points priced in by the markets. The FOMC seeks to prove to investors that they're serious about reining in inflation. Traders, though, are likely to home in on cues for when the central bank will pause tightening.

The CPI jumped 9.1% in June from a year ago, its fastest rate in more than 40 years, accelerating from 8.6% in May. And the PPI surged 11.3% in June Y/Y, up from 10.9% in May. In response, traders started pricing in a 100-basis-point rate hike in July, but Fed officials quickly pushed back in their public comments, guiding them back to a 75-bps increase.

The CME FedWatch tool puts a probability of 75.1% on a 75-bps rate hike to 2.25%-2.5% for the July meeting and a 24.9% probability for a 100-bps increase; for September, markets are pricing in a 49.6% probability for a 50-bps hike on top of that and a 42% chance of a 75-bps increase.

Morgan Stanley economists led by Ellen Zentner expect the fed funds rate to peak at 3.625% in December 2022, with the Fed taking the first steps toward normalizing the rate by the end of 2023.

J.P. Morgan equity strategists headed by Mislav Matejka, meanwhile, see the growth-policy tradeoff, which worsened from both sides in the first half of 2022, as "likely to improve as we move through 2H." With challenged activity momentum and softer labor markets, "the reset in activity is what many want to see."