Traders work on the floor of the New York Stock Exchange on September 13, 2024.
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Investors will look to August retail sales data on Tuesday for a final look at the health of the U.S. consumer ahead of the Fed’s rate decision. Economists polled by Dow Jones expect a 0.2% decline. Excluding autos, they expect a 0.2% increase. The results could affect the outcome of the rate cut.
Wall Street is eagerly awaiting the Fed’s rate cut, a move that could help boost corporate profit growth amid high borrowing costs and elevated inflation. The Fed launched its first aggressive rate-hike campaign in March 2022.
While Wall Street is expecting a rate cut on Wednesday, the market is split on how big that cut might be. Traders are currently pricing in a 67% chance that the central bank will cut rates by 50 basis points, according to CME Group’s Fed Watch tool. That’s up from a 47% chance on Friday.
“Market expectations are split between a 25 basis point and 50 basis point rate cut, as the decision is complicated by conflicting signals of strong economic activity and a weakening labor market,” said Seema Shah of Principal Asset Management. “Market expectations have rarely been so split, so close to a (Federal Open Market Committee) meeting.”
While a 50 basis point cut is not out of the question, the chief global strategist believes the Fed should take a more cautious approach and cut rates by 25 basis points. She sees additional 25 basis point cuts in November and December.
In other economic news, industrial and manufacturing production data are due for August, as well as the National Association of Home Builders’ housing market index for September.
