Markets, analysts divided over size of first cut By Investing.com

Investing.com — If the Federal Reserves September meeting approaching, analysts and marketsMost investors were divided over the size of the expected rate cut, with some preferring a 25 basis point (bp) cut and others suggesting there was potential for a bigger 50-bp reduction.

BCA research argues that a 50 basis point rate cut could still be an option, it would likely have been telegraphed by Fed officials before the blackout period. New York Fed President John Williams and Governor Christopher

Waller did not signal a jumbo cut, leading BCA to expect a 25bp cut. However, futures markets have raised the probability of a 50bp cut to 48%, driven by a Wall Street Journal article and comments from former New York Fed President William Dudley hinting at a “strong case” for a bigger movement.

HSBC signals sentiment for a 25 basis point rate cut in September, followed by further 50 basis point cuts through 2024.

HSBC remains optimistic on US Treasuries, maintains strong outlook for US dollar, despite expectations of some market volatility around the from the Fed policy path.

Bank of America emphasizes the “unusual uncertainty” around the from the Fed next move. The market is pricing in a 36% chance of a 50bp cut, but BofA is leaning toward a 25bp cut, noting that the Fed has not signaled a bigger Move before the power outage.

BofA also expects Fed Chairman Jerome Powell to discuss labor market risks in his press conference and potential indicate that it is prepared to accelerate the interest rate if necessary.

Barclays expects a 25 basis point cut, but sees potential for bigger cuts if labor market conditions deteriorate. They predict a total of 75 bps in cutbacks before 2024.

Barclays said: “We expect a dovish FOMC statement indicating further progress on inflation, that upside risks to inflation have diminished and downside risks to employment have increased, and that the Committee is alert to the risks of undue weakening in labor market conditions. We expect the statement to indicate that future adjustments will be dependent on the data, the outlook And the balance of risks.”

Finally, JPMorgan stands out with a call for a 50 basis point rate cut. According to him, by bringing forward the rate cuts, the Fed would be better able to address future economic risks.

However, they acknowledge that the FOMC’s internal dynamics may prompt the Fed to adopt a more conservative 25 basis point approach.

“What the FOMC will do is less clear, but we maintain our call that they will do the ‘right thing’ and cut 50bp,” JPMorgan wrote. “We expect the median for this year to be 100bp lower than the current 5-3/8% rate setting, leading to two more 25bp cuts at the last two meetings of the year.”