In the financial market, the prevailing expectation is that the U.S. Federal Reserve (FRB) will decide on a rate cut of 50 basis points (bp) at the Federal Open Market Committee (FOMC) meeting on the 17th-18th. The photo was taken at the New York Stock Exchange on the 9th (2024, Reuters/Brendan McDermid)
[17th Reuters] – In the financial market, the prevailing expectation is that the U.S. Federal Reserve (FRB) will decide on a rate cut of 50 basis points (bp) at the Federal Open Market Committee (FOMC) meeting on the 17th-18th.
As of the morning of the 17th, the probability of a 50 bp rate cut priced into the futures market is about 67%, while the probability of a 25 bp rate cut is about 33%. It is expected that there will be rate cuts in all three FOMC meetings including this month, with two 50 bp cuts and one 25 bp cut.
Until the end of last week, the outlook for a 25 bp rate cut was predominant, but after the U.S. newspaper Wall Street Journal and the British newspaper Financial Times reported that a 50 bp cut remains a possibility, market expectations changed.
Following these reports, the outlook for a 50 bp rate cut strengthened, and the unexpectedly positive U.S. retail sales data for August announced on the 17th did not have an impact.
The FRB did not clearly deny the reports from both newspapers, which also reinforced the 50 bp rate cut expectations.
Krisna Guha from Evercore ISI noted, “The market’s movement is leaning towards a 50 bp rate cut at the September FOMC without the FRB contesting it as time passes, so while it’s not absolutely certain, I believe the likelihood of the FRB proceeding with a 50 bp cut is high.”
Guha is one of the few economists who had anticipated a 50 bp rate cut before the market’s expectations widened. He expects that if a 50 bp rate cut is decided in the FOMC, one or two members will vote against it.
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