As the crucial two-day meeting of the US Federal Reserve begins tonight, the focus is on whether Chairman Jerome Powell will implement a significant rate cut. The main question is whether Powell will go for a rare 50 basis point cut to counter a potential recession or choose a smaller 25 basis point cut for a more gradual approach to stabilize the economy.
Investors are eagerly awaiting the decision, with 60 per cent of Wall Street traders predicting a 50 basis point cut, according to the CME FedWatch Tool. Markets are also anticipating a total reduction of at least 100 basis points by the end of 2024, marking the first major rate cut cycle since 2020.
Regardless of whether the Fed chooses a 25 or 50 basis point cut, the real key for stock market movements will be Powell's reasoning behind the decision and the details revealed in the Fed's dot plot projections.