Wall Street Week Ahead: Size, speed of rate moves in focus as Fed poised to start cuts
Federal Reserve is in focus next week, as uncertainty swirls over how much the U.S. central bank will cut interest rates at its monetary policy meeting and the pace at which it will reduce borrowing costs in coming months.
The S&P 500 index is just 1% shy of its July record high despite weeks of market swings sparked by worries over the economy and seesawing bets on the size of the cut at the Fed's Sept. 17-18 meeting.
After fluctuating sharply throughout the week, Fed funds futures on Friday showed traders pricing an almost equal chance of a 25 basis point cut and a 50 basis point reduction, according to CME Fedwatch. The shifting bets reflect one of the key questions facing markets today: whether the Fed will head off weakening in the labor market with aggressive cuts, rather than take a slower wait-and-see approach.
«The market wants to see the Fed portray a level of confidence that growth is slowing but not falling off a cliff,» said Anthony Saglimbene, chief market strategist at Ameriprise Financial. «They want to see… that there's still this ability to gradually normalize monetary policy.»
Investors will focus on the Fed's fresh economic projections and interest rate outlook. Markets are pricing in 115 basis points of cuts by the end of 2024, according to LSEG data late on Friday. The Fed's June forecast, by comparison, penciled in one 25-basis point cut for the year.
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