From CNBC: 2024-09-17 15:55:52

Federal Reserve Chairman Jerome Powell faces an unusual level of uncertainty at the latest meeting of the Federal Open Market Committee. Traders are divided on whether the Fed will opt for a traditional quarter-point rate cut or a potentially more aggressive half-point reduction. The decision will be announced Wednesday at 2 p.m. ET.

Markets have been volatile in predicting the Fed’s move, with a late shift towards a 50-basis-point cut last week. Despite differing viewpoints, many on Wall Street predict a more cautious approach from the central bank. The debate among officials could lead to an interesting FOMC meeting with an impactful decision to be made.

The Fed has been holding its benchmark rate steady between 5.25%-5.5%, despite falling inflation and rising unemployment rates. With a rate cut expected at this meeting, the decision lies in how policymakers balance the fight against inflation with the slowing labor market.

In addition to the rate cut, the meeting will include key signals through the “dot plot” indicating future rate trends. Market expectations point to several rate cuts next year, with potential quarter-point decreases at each remaining meeting in 2024. The September projections will offer insight into the Fed’s outlook for 2027.

The FOMC will release the Summary of Economic Projections, including forecasts for unemployment, GDP, and inflation. Adjustments are expected, with possible revisions to unemployment and inflation rates. The meeting will likely focus on labor market risks, as the Fed seeks to maintain maximum employment while combating inflation.

Following the release of the dot plot and the SEP, the FOMC’s post-meeting statement will need to reflect the rate cut decision and any additional forward guidance provided. The statement will be followed by Chair Powell’s press conference at 2:30 ET. Expectations are for a more confident tone on inflation and a reiteration of the Fed’s commitment to maximizing employment, with minimal detail on future guidance.

Read more: The Fed’s biggest interest rate call in years happens Wednesday. Here’s what to expect