- The odds of a rate cut by the Federal Reserve are now evenly split between a 25 or 50 basis point reduction, as per the CME’s FedWatch tool.
- Former New York Fed President Bill Dudley has argued for a larger rate cut, stating the current federal funds rate may be up to 200 basis points above neutral, suggesting a strong case for a more aggressive policy move.
The Federal Reserve’s upcoming rate decision is teetering on a knife’s edge, with the odds of a significant cut climbing. According to the CME’s FedWatch tool, the chances of a 25 or 50-basis-point reduction are now evenly split at 50-50.
The decision from the cental bank comes in on Wednesday.
Former New York Fed President Bill Dudley, speaking last week, bolstered the case for a more aggressive move, stating the federal funds rate could be up to 200 basis points above neutral. Dudley argued there’s a “strong case” for the Fed to start big.
However, major banks are possibly leaning toward the Fed starting small. In a note, Bank of America’s analysts suggested “a small chance” of a 50bps cut, while UBS’s Brian Rose also acknowledged the possibility, though was not factoring it into his baseline.
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