All eyes are on the Federal Reserve, which is expected to lower interest rates from the current target range of 5.25% to 5.5%. Fed funds futures data suggests that the market is split on whether central bank policymakers will lower rates by a half point or a quarter point. The Fed will issue its rate decision at 2 p.m. Eastern on Wednesday, followed by Chair Jerome Powell's press conference at 2:30 p.m.
Investors should watch what they wish for, according to Aditya Bhave, senior U.S. economist at Bank of America. The firm anticipates a 25 basis point cut on Wednesday, warning that a 50 basis point cut could ultimately be a worrisome sign. "Risk assets might initially rally on the back of this dovish surprise," Bhave wrote Wednesday."But we'd caution investors that the act of cutting by 50bp means the Fed is less confident about a soft landing."