16/09/2024 Evening Reports
When the Federal Reserve meets Wednesday, officials are expected to mark the end of an era as they cut interest rates for the first time in four years and chart a course for lower rates over the next two years.
“This is a big meeting,” said former Kansas City Fed president Esther George. “It’s one that’s been foreshadowed since late last year. It’s long been expected.”
The central bank is expected to lower rates by a quarter percentage to a new range of 5.0-5.25% from its 23-year high of 5.25% to 5.5% on Wednesday when their policy meeting concludes. The actions will officially mark the termination of the most aggressive inflation-fighting campaign since the 1980s.
Investors bets on how deeply the Fed will cut rates for the first time have been fluctuating widely. As of Friday afternoon, traders were pricing in nearly 50-50 chance of the Fed trims its policy rate by 25 basis points verses a steeper 50 basis points. Those odds compare with an 85% chance for a 25 basis point cut on the back of key inflation and jobs data over the past week.
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Dollar Dips as Focus Shifts to Fed’s Rate Decision Amid Growing Speculation of Larger Cut
The US dollar weakened against its major trading partners early Monday as markets turned their attention to the Federal Open Market Committee’s (FOMC) upcoming rate policy announcement on Wednesday. Speculation of a larger-than-anticipated 50 basis point rate cut has increased, with the CME FedWatch tool showing a 59% chance of such a move, compared to a 41% chance of a smaller 25 basis point reduction.
This marks a notable shift from a week ago, when the likelihood of a 25 basis point cut was seen as the dominant scenario.
Key data releases this week include Tuesday’s retail sales and industrial production figures, followed by home building and oil stocks data on Wednesday. Thursday will see jobless claims, the current account gap, and existing-home sales, while Friday rounds out the week with state-level unemployment figures and the St. Louis Fed’s GDP Nowcast estimate.
Federal Reserve officials are currently in a ‘quiet period’ ahead of the meeting.
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