The Fed will hold its regular FOMC meeting on the 17th and 18th.
Market line big cut probability 52% vs. baby cut 48% predicted
Powell’s press conference is also noteworthy
Jerome Powell, Chairman of the U.S. Federal Reserve, is giving a speech in Washington, D.C. on the 31st of last month (local time). Washington, D.C./Reuters Yonhap News”/>
▲Jerome Powell, Chairman of the U.S. Federal Reserve, is giving a speech in Washington, D.C. on the 31st of last month (local time). Washington, D.C./Reuters Yonhap News
This week (16th-20th), the New York Stock Exchange is expected to see the US Federal Reserve (Fed) Base rate The decision is likely to be watched closely. While it is certain that the Fed will cut rates for the first time since 2020 at this Federal Open Market Committee (FOMC) meeting, it is still unclear whether the Fed will start with a baby cut of 0.25 percentage points or a big cut of 0.5 percentage points.
Last week, the Dow Jones Industrial Average rose 2.6% from the previous week on the New York Stock Exchange. The Nasdaq, which is centered on technology stocks, jumped 5.95%, and the S&P 500 Index rose 4.02%, enjoying its best week of the year. Technology stocks led the market’s rise amid expectations of a Fed rate cut.
The Federal Reserve will hold a regular FOMC meeting for two days starting on the 17th. On the second day of the meeting, the 18th, the Federal Reserve will decide on the base interest rate and release economic forecasts, including a dot plot.
The Federal Reserve has been aggressively raising interest rates since March 2022 to curb high inflation following the COVID-19 pandemic. In the process, the federal funds rate rose to a range of 5.25-5.5%, the highest level in 20 years.
But recently inflationAs the slowdown becomes more evident, the market is expecting the Fed to cut rates at this meeting. If the market’s expectations are right, it will be the first time the Fed has cut rates since 2020.
The key question is how much the Fed will cut interest rates before it begins to ease monetary policy. However, opinions on this are sharply divided on Wall Street.
Currently, the Chicago Mercantile Exchange (CME) interest rate futures market is reporting 48% and 52% probabilities of a 0.25% point (p) and 0.5% point cut, respectively. As of the 12th, the market predicted a 0.5% point cut probability of only 28%, but on the 13th, the last trading day of last week, the possibility of a 0.5% point cut, the so-called ‘big cut’, suddenly emerged. Former New York Federal Reserve Bank (Fed) President William Dudley argued that the Fed has sufficient grounds to carry out a ‘big cut’.
While some predict that the Fed will cautiously and gradually lower the benchmark interest rate as the core consumer price index (CPI, 3.2% in August) still exceeds the Fed’s 2% target, some experts predict that the Fed may preemptively implement a large-scale cut in response to the slowing employment indicators.
Yahoo Finance diagnosed that no matter which direction the Fed decides, the stock market volatility could increase.
Jerome Powell’s press conference is also considered a factor in determining the direction of the stock market. Powell will hold a press conference at 2:30 PM after the regular FOMC meeting on the 19th.
“Powell’s mission will depend largely on what the Fed chooses on Tuesday,” said Michael Feroli, an economist at JPMorgan. “If they decide to cut rates by half a percentage point, Powell will likely explain why such a move would underpin the outlook for sustained economic expansion in a low-inflation environment. If they choose instead to cut rates by a quarter of a percentage point, Powell would signal that the Fed is prepared to ease more aggressively in response to signs of labor market weakness.”
In addition to the interest rate decision, the Fed also announces dot plots and growth rates. InflationThe outlook for unemployment rates is also of interest.
Other major economic indicators include retail sales (17th) and industrial production (17th), which show the spending power of Americans. Experts forecast that August retail sales will decrease by 0.2% compared to the previous month. In July, the previous month, there was a surprise increase of 1%, but overall retail sales are expected to have been sluggish due to decreased vehicle sales in August. Industrial production is expected to have increased by 0.2%, improving from the previous month.
– What are the implications of the upcoming FOMC meeting on interest rates and the stock market?
Table of Contents
Here is a comprehensive and SEO-optimized article on the topic of the Federal Open Market Committee (FOMC) meeting:
Fed’s Upcoming FOMC Meeting: Market Expects Rate Cut, Powell’s Press Conference Takes Center Stage
The New York Stock Exchange is bracing for the US Federal Reserve’s (Fed) highly anticipated Federal Open Market Committee (FOMC) meeting, scheduled for the 17th and 18th. With the market predicting a rate cut for the first time since 2020, investors are eagerly waiting to see whether the Fed will opt for a ”baby cut” of 0.25 percentage points or a “big cut” of 0.5 percentage points.
Market Expectations: Rate Cut Probability
As of the 12th, the Chicago Mercantile Exchange (CME) interest rate futures market reported a 48% probability of a 0.25% point cut and a 52% probability of a 0.5% point cut. The market’s expectations have shifted significantly, with the probability of a 0.5% point cut increasing from 28% on the 12th to 52% on the 13th.
Powell’s Press Conference: A Key Factor in Determining Market Direction
Jerome Powell, Chairman of the US Federal Reserve, will hold a press conference at 2:30 PM on the 19th, following the FOMC meeting. Powell’s remarks will likely influence the direction of the stock market. According to Michael Feroli, an economist at JPMorgan, “Powell’s mission will depend largely on what the Fed chooses on Tuesday. If they decide to cut rates by half a percentage point, Powell will likely explain why such a move would underpin the outlook for sustained economic expansion in a low-inflation environment.”
Economic Forecasts and Dot Plots
In addition to the interest rate decision, the Fed will also release economic forecasts, including a dot plot, which provides insights into the Fed’s future policy direction. The dot plot is expected to indicate the Fed’s inflation and growth expectations, which may impact the market’s sentiment.
Federal Reserve’s Recent Rate Hike history
The Federal Reserve has been aggressively raising interest rates since March 2022 to curb high inflation following the COVID-19 pandemic. The federal funds rate has risen to a range of 5.25-5.5%, the highest level in 20 years. However, with inflation slowing down, the market is expecting the Fed to ease its monetary policy.
Inflation Slowing Down, Employment Indicators Weakening
The core consumer price index (CPI) stood at 3.2% in August, still above the Fed’s 2% target. However, employment indicators have been weakening, which may prompt the Fed to consider a large-scale cut in interest rates.
Stock Market Volatility Expected
Yahoo Finance predicts that stock market volatility could increase, regardless of the Fed’s decision. The market’s reaction to the Fed’s announcement will depend on the extent of the rate cut and Powell’s comments during the press conference.
Conclusion
The upcoming FOMC meeting is expected to be a pivotal event in the financial markets. With the market predicting a rate cut, the Fed’s decision will likely impact the direction of the stock market. Powell’s press conference will also be closely watched, as his remarks will provide valuable insights into the Fed’s future policy direction.
KeywordRich: Federal Reserve, FOMC meeting, interest rate decision, Jerome Powell, press conference, stock market, inflation, employment indicators, dot plot, economic forecasts, Federal Open Market Committee, Fed, rate cut, baby cut, big cut.
What are the key factors influencing the Fed’s decision on interest rates during the FOMC meeting?
The Federal Reserve’s Crucial FOMC Meeting: Rate Cut Expectations and Market Volatility
The United States Federal Reserve is set to hold its highly anticipated Federal Open Market Committee (FOMC) meeting on the 17th and 18th, with market participants eagerly waiting to see if the Fed will finally cut interest rates for the first time since 2020. The meeting is likely to be a crucial event for the global economy, with the Fed’s decision on the base interest rate and economic forecasts expected to influence market sentiment.
Rate Cut Probability: Big Cut vs. Baby Cut
The market is expecting the Fed to cut interest rates, but the question is how much. Currently, the Chicago Mercantile Exchange (CME) interest rate futures market is reporting a 48% probability of a 0.25% point (baby cut) and a 52% probability of a 0.50% point (big cut). This has led to a divide on Wall Street, with some experts predicting a cautious and gradual approach to lowering the benchmark interest rate, while others believe the Fed may opt for a more aggressive cut in response to slowing employment indicators.
Inflation Slowdown and Market Expectations
The Fed has been aggressively raising interest rates since March 2022 to combat high inflation following the COVID-19 pandemic. However, with the inflation slowdown becoming more evident, the market is expecting the Fed to ease monetary policy. The core consumer price index (CPI) still exceeds the Fed’s 2% target, but the market is hoping for a rate cut to boost economic growth.
Jerome Powell’s Press Conference: A Key Factor in Market Direction
Federal Reserve Chairman Jerome Powell’s press conference, scheduled for 2:30 PM on the 19th, is also expected to be a crucial event in determining the direction of the stock market. Powell’s comments will be closely watched, as they will provide insight into the Fed’s decision-making process and the outlook for future monetary policy.
Market Volatility Ahead
Regardless of the Fed’s decision, market volatility is expected to increase. The stock market has already witnessed a significant rally in recent weeks, with the Dow Jones Industrial Average rising 2.6% and the Nasdaq jumping 5.95% last week. Technology stocks have led the market’s rise, amid expectations of a Fed rate cut. However, the market is bracing for potential volatility ahead, as the Fed’s decision will have a significant impact on investor sentiment and market direction.
Economic Forecasts and Dot Plot
The Fed will also release economic forecasts, including a dot plot, which will provide insight into the Fed’s expectations for future economic growth, inflation, and interest rates. The dot plot is a critical component of the Fed’s communication strategy, as it provides a visual representation of individual policymakers’ expectations for future interest rates.
Conclusion
The Federal Reserve’s FOMC meeting is a crucial event in the economic calendar, and the outcome will have significant implications for the global economy. The market is eagerly waiting to see if the Fed will cut interest rates and by how much. With the current probability of a big cut and baby cut nearly evenly split, the outcome is far from certain. However, one thing is clear: the Fed’s decision will have a significant impact on market direction, and investors will be closely watching Jerome Powell’s press conference for clues on the future of monetary policy.
Keywords: Federal Reserve, FOMC meeting, interest rates, inflation, Jerome Powell, stock market, monetary policy, economic forecasts, dot plot.
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