The FOMC meeting starts today with the rates decision programmed for tomorrow at 2 pm EST. As you can see below, something happened last week that flipped the odds between 25 bps and 50 bps. A reporter close to the Fed reported on Friday that it was possible to have a 50 bps cut, reinforcing that scenario again today in another article. As of this morning, the odds for a 50 bps cut are 64%, which is typically considered enough consensus support for the Fed to feel comfortable it’s not going to surprise the market, to avoid overreactions. The narrative behind the move is the change in the balance of risks from high inflation to high unemployment. The goal is to engineer a soft landing. There may be some collateral damage in terms of a perception of bias towards the Democratic Party in the election, but Powell was very vocal on the independence of the Fed. The stage is set for 50.
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