Fed Can Avoid Surveys!

According to CME Group's FedWatch Tool, the likelihood of a 50-basis point cut is now just under 60%, down from about 65% earlier today. The market is pricing in a 41% chance of a 25-basis point cut.

Former New York Fed President Bill Dudley has noted there is a "strong case" for a larger cut, but the country's political situation could prevent policymakers from making significant decisions.

On the other hand, when examining bond yields, real interest rates are already lower than what the central bank can adjust. Currently, two-year bond yields stand at 3.665%, while the U.S. 10-year Treasury Note sits at 3.695%. Given these figures, the argument that borrowing costs are currently well above the so-called neutral rate—which neither restricts nor stimulates economic activity—seems reasonable.

Moreover, with the unemployment rate at 4.2%, retail sales increasing, and GDP expectations higher for the third quarter, the US economy does not appear to be in such serious trouble that it would need to reduce the scapegoat for a significant shock. yes, that too with the risk of re-growth of inflation.

The Fed's dot plots will also be released after the statement, and it will be crucial to review them to assess what we can expect by year-end, including the central bank's economic and inflation projections.

U.S. stocks are mixed on Wednesday ahead of the Fed's key interest rate decision. At the time of writing, the Dow Jones 30 had lost 74 points or 0.18%, the S&P 500 was flat, and the Nasdaq 100 had gained 27 points or 0.16%.