The long-awaited US Federal Reserve decision will come out shortly, with traders expecting officials to cut interest rates for the first time this year and reveal the scope of reductions over the next few months.
That will be key in shaping investor decisions going forward. For now, action is relatively quiet on Wall Street. The S&P 500 wavered near a record, with megacaps losing steam. The dollar remained at the lowest since 2022. Bond yields barely budged.
Traders are broadly expecting a quarter-point US Fed rate cut. hey are almost certain Jerome Powell will signal further reductions aimed at supporting a saggy labour market.
That setup has helped US stocks power to all-time highs in recent weeks.
Economists surveyed by Bloomberg News largely expect officials to pencil in two US Fed rate cuts for this year, in line with projections submitted in June. That would imply only one more cut after this week’s meeting, either in October or in December.
While the potential for market-moving surprises is ample, options trading shows bets on a calmer-than-normal reaction. At JPMorgan Chase & Co., Andrew Tyler says the most-likely outcome is the Fed cutting by a quarter point, with the S&P 500 gaining between 0.5% to 1% as long as Powell tilts dovish and signals gradual reductions.
What Will Jerome Powell Say?
- Today’s FOMC decision will hinge on the anticipated magnitude of further labor-market weakness. Markets pricing in a dovish Fed tone. How Jay Powell addresses consumer spending will hint at whether this is one and done or a series of cuts. — Scott Wren, Wells Fargo Investment Institute
- In a nod to data that suggests that US-based firms are growing reluctant to hire, the US Fed will cut its policy rate by 25 basis points this week. But to the FOMC’s extant hawks, Fed policy doesn’t present as being tight. And so Jay Powell will offer balance. He will highlight the downside risk to employment growth, but refrain from signaling a (long) string of cuts after September. — Thierry Wizman, Macquarie Group
While the potential for market-moving surprises is ample, options trading shows bets on a calmer-than-normal reaction. At JPMorgan Chase & Co., Andrew Tyler says the most-likely outcome is the Fed cutting by a quarter point, with the S&P 500 gaining between 0.5% to 1% as long as Powell tilts dovish and signals gradual reductions.
What Will Jerome Powell Say?
- Today’s FOMC decision will hinge on the anticipated magnitude of further labor-market weakness. Markets pricing in a dovish Fed tone. How Jay Powell addresses consumer spending will hint at whether this is one and done or a series of cuts. — Scott Wren, Wells Fargo Investment Institute
- In a nod to data that suggests that US-based firms are growing reluctant to hire, the US Fed will cut its policy rate by 25 basis points this week. But to the FOMC’s extant hawks, Fed policy doesn’t present as being tight. And so Jay Powell will offer balance. He will highlight the downside risk to employment growth, but refrain from signaling a (long) string of cuts after September. — Thierry Wizman, Macquarie Group