Expert consensus foresees 25bps cut and short-term volatility

Ahead of Federal Reserve Meeting, Markets Anticipate Rate Cuts and Price Impact

Economists' Predictions

In a Bloomberg survey of 114 economists, 104 anticipate a 25-basis-point rate cut by the Federal Reserve, the first in four years. Nine analysts forecast a 50-bps reduction.

Market Expectations

According to QCP Capital, citing Fed Fund Futures pricing, markets give a 66% probability of a 50-bps cut at the Federal Open Market Committee meeting on Wednesday, September 18. The likelihood of a 25-bps cut is estimated at 33%.

CME FedWatch data indicated a 61% probability of a 50-bps cut as of September 16. Last week, trader expectations were only 14%.

Impact on Price Movements

QCP Capital analysts caution that the impact of rate cuts is currently uncertain. In an investor note, they emphasize the influence of the monetary policy decision, Dot plot projections, and Fed Chair Jerome Powell's post-FOMC remarks on price movements.

Despite the uncertainty, QCP predicts high volatility in the days following the meeting as traders adjust their positions. The rate cut could also signal the onset of significant macro trends.

Crypto Market Reaction

In the hours leading up to the FOMC meeting, the total cryptocurrency market experienced a 4% decline. Bitcoin (BTC) and Ethereum (ETH) each lost over 2% in the past 24 hours. Other major altcoins such as Solana (SOL), Ripple (XRP), Dogecoin (DOGE), and Toncoin (TON) also saw losses.

Industry Perspectives

Advocates argue that increased liquidity in a low-rate environment will drive price increases. Market participants predict that historical patterns will repeat in the fourth quarter, leading to a surge in prices.

However, JPMorgan CEO Jamie Dimon downplays the significance of the FOMC meeting and the Fed's pivot. He believes that global events such as geopolitical tensions in Europe and the Middle East have a greater impact on the economy.