Is the Fed Ready to Cut? Will the Numbers Surprise You?
Ahead of the FOMC decision on Wednesday-Thursday (WIB), the market considered the Fed's interest rate cut almost certain. The probability of a 25 bps cut was in the 90–95% range according to pricing futures (CME FedWatch), while the chance of a 50 bps cut was considered slim (≈5–10%). The main focus was not only on the magnitude, but also on the dot plot and Jerome Powell's explanation regarding the pace of further easing.
Economists' consensus was also consistent: in the latest Reuters survey, 105 out of 107 economists expected the Fed to cut 25 bps for the first time this year. Many market participants then debated the next path—whether easing would continue gradually at the next meeting, or whether the Fed would pause while assessing inflation and employment data.
On the house side of the major banks' view, Morgan Stanley and Deutsche Bank projected three cuts through 2025, in line with signs of weakening inflationary pressures. However, there is a more aggressive minority: Standard Chartered opened a 50 bps scenario this month after weak employment data—although the odds remain small compared to the consensus of 25 bps.
Essentially, the rate cut may not be a major surprise to the market—what will determine the direction of assets is Powell's tone and the latest interest rate projections. If Powell signals faster/more frequent easing, the dollar could be under pressure and risk assets could be helped; conversely, if his message is cautious, the risk asset rally could be restrained. (ayu)
Source: Newsmaker.id
