Traders are overwhelmingly anticipating a 25-percentage-point rate cut from the US Federal Reserve following its meeting on Thursday. According to the CME’s FedWatch Tool, the probability of such a move is now priced at 89.6 per cent, a substantial increase from just 30 per cent in November. This shift in expectations follows the release of delayed data indicating a moderate increase in consumer spending towards the end of the third quarter. The data has bolstered investor confidence that the Fed will prioritise lowering borrowing costs to support the labour market.
Despite persistent inflation, there is growing speculation that the Federal Reserve will move to lower interest rates. While most policymakers have remained cautious about easing monetary policy, some influential voices within the Fed have recently adopted a more dovish position. This divergence in opinion sets the stage for a potentially divided vote on interest rate policy.
Michael Brown, a senior research strategist at Pepperstone, anticipates a three-way split among voters, with Governor Stephen Miran potentially favouring a larger 50-basis-point cut. Other analysts suggest that at least three policymakers may prefer to maintain the current rate.
Deutsche Bank analysts have noted that if four or more officials dissent, it would represent the most significant split within the Fed since 1992. The outcome of the meeting will be closely watched by markets globally, as any shift in US monetary policy typically has far-reaching implications.
