Investors are eagerly awaiting the Federal Reserve’s policy decision this week, questioning if interest-rate cuts will extend into next year. Markets have priced in reductions deep into 2026 to prevent a recession, but concern arises with inflation above target and tariffs impacting prices. Traders are preparing for potential volatility.

Financial markets are on edge, with Treasury yields at historic lows, US stocks at record highs, and the dollar struggling. Options traders are betting on a 1% swing in the S&P 500 on Wednesday, the biggest move in weeks. The reaction will depend on the Fed’s dot plot and whether more rate cuts are confirmed.

The Fed’s meeting could result in a ‘Sell the News’ event for stocks, as markets anticipate a quarter-point cut. President Trump’s criticism of Fed Chairman Powell adds pressure, with economic adviser Stephen Miran potentially joining the Fed. The decision may hinge on dissenting votes and the perceived hawkishness of the Fed’s actions.

Investors are wary of a political Fed that may overease, with implications for market stability. The decision will be closely watched, with potential implications for stocks, bonds, and currencies. The Fed’s approach to interest rates will shape market reactions and investor sentiment in the coming months.

Read more at Yahoo Finance: Markets Gear Up for Series of Fed Cuts With Bullish Bets at Risk