FOMC Statement:
1. Interest Rate Decision: It is expected that this meeting will result in a 25 basis point rate cut to a range of 4% to 4.25%, the first rate cut since December of last year; a 50 basis point cut is also possible.
2.
Voting Split: The September decision may face a three-way split: a majority of officials are expected to support a 25 basis point rate cut, two or three officials (Bowen and Bowman, along with Trump confidant Milan) will support a 50 basis point cut, and a minority (one or two) may support maintaining interest rates unchanged.
3.
Interest Rate Cut Path: The June dot plot indicated two rate cuts in 2025. The updated dot plot is expected to show an increase in the number of officials supporting rate cuts, an overall stronger preference for easing, but a more diversified distribution, reflecting increasing internal divisions. The dot plot may indicate that some officials believe a cumulative rate cut of 100 basis points should be made by 2025, implying at least one 50 basis point cut this year. 4. Comparative Wording: Expected to explicitly mention deepening signs of labor market weakness, echoing recent weak data. Powell may acknowledge slowing economic momentum in the first half of the year.
Powell Conference:
1. Interest Rate Outlook: The market will be watching Powell's conference for clues on the path of future rate cuts, whether there will be a series of steady cuts or continued data-driven, meeting-by-meeting decisions.
2. Interest Rate Decision: Amidst significant downward revisions to previous employment data, growing signs of labor market weakness are expected to be a key factor in the Fed's rate cut. Powell may repeat his concerns about employment risks from his August Jackson Hole speech, downplaying the risks of persistent inflation and higher wage growth.
3. Political Interference: Powell may face questions regarding the appointment of Trump confidant Milan to the Federal Reserve Board. Board member Cook, previously embroiled in mortgage litigation, may also be mentioned. Furthermore, Trump, who has repeatedly pressured Powell, will be interviewed at 3:00 AM and is expected to continue commenting on the interest rate decision, criticizing the Fed for its late rate cut and urging a faster pace of easing.
