American Federal Reserve Building
This evening, the US Federal Reserve meeting will be concluded amid widespread anticipation in the markets for monetary policy decision, at a time when expectations indicate a possible reduction in the interest by 25 basis points, in light of the division within the council over the need for this reduction, and the continuation of political pressure from US President Donald Trump to push the federal towards a faster facilitation path.
Analysts signed surveyed numbers Their opinions are that the federal go to a limited reduction between “preventive steps”, while maintaining a cautious tone that emphasizes reliance on data, noting that the impact of the decision on the markets will be largely dependent on the features of the “point plan” and the Jerome Powell tone during the press conference.
Reducing decision: Why only 25 points?
Ahmed Azzam, head of research and market analysis of the Ikoyette Group
Ahmed Azzam, head of research and market analysis of the Ikoye Group, said that “the wise decision” from the American federal at this time is to reduce interest by 25 basis points, as economic data does not justify a half -point reduction in one point.
He pointed out that inflation is still higher than the goal, but it does not panic according to Powell’s statements in Jackson Hall, while the data reflects a mixture of slowing the labor market on the one hand, and a stronger performance than expected for retail sales and industrial production during August on the other hand.
Azzam added that a reduction by 50 basis points may be understood as a script or undergoing political pressure, which may harm the credibility of the federal and reduce the margin of maneuvering in the upcoming meetings, while reducing 25 basis points two main goals: interaction with the flexibility of the labor market, and maintaining the credibility of communication with the markets, while keeping the door open to movements in the social and December social.
At the level of activity, Azzam pointed out that the data indicates a relative durability in consumption and the industrial sector, in exchange for gradually in the labor market that appears in high unemployment rates and slow employment, which means that there is no breakdown in the demand that justifies a significant reduction, and there is not enough price control that allows adventure in it.
Michael Brown, chief research strategy in Pepperstone
For his part, Michael Brown, chief research strategy in PepperstoneThe markets have already priced 25 basis points, but it is not expected that the decision will be completely unanimously, and some members would like to oppose the preference for a greater reduction or keep the status quo.
He added that the new member of the council, Stephen Miran, may demand a reduction of 50 points, while Bowman and Waller may record objections from a more facilitated one, while other members may oppose the preference for stabilizing interest, such as the main branches of St. Louis and Kondas City branches.
Brown pointed out that the statement of monetary policy will again confirm the Federal’s dependence on data, but it may allow an “additional reduction” instead of just “amendments”, which enhances the bias of the council to facilitate.
In turn, Milad Azar, the financial market analyst at Xtb menaThe markets are expected almost completely a reduction of 25 basis points, as futures and polls reflect an actual installation of this possibility, but the real interaction will depend on whether or not the reduction will come within a wider direction of facilitation.
Point scheme: the decisive point in pricing
On the points plan expected to be issued as part of the update of the Federal Economic estimates, Ahmed Azzam said that it is likely that the “average interest rates” remain at a total reduction of 50 basis points during 2024, with an internal contrast in distribution between members who see three steps, and others prefer only two steps.
He stressed that the most important for the market is not only the number, but the distribution of the reduction through the years 2026-2027, as any light inclination there may be understood as an implicit undertaking with a broader tendency to facilitate if the prices continue to decline and the labor market by relaxation.
Azzam expected that the official statement and the press conference be tightened to link any subsequent move to the data path, with a possible description of a “preventive dose” aimed at controlling balance, warning in return that the waving of a “serial cycle” for interest discounts may push the markets towards a faster facilitation pricing than expected.
He added that the session was held amid an unusual institutional noise, with Stephen Miran being confused as a member of the Governor Council, and the presence of Lisa Cook after a judicial ruling, as well as a discussion about the chairmanship of the council, which increases the possibility of the emergence of opposition voices from both sides, and enhances the trend to a consensual option that supports a limited reduction of 25 basis points.
Michael Brown, for his part, expected the point scheme to keep the total reduction of 50 points in 2024, and 50 additional points in 2026, while it is difficult to change the average of 2025 except with the opinion of 8 members, adding that Powell will try to reduce the importance of this plan, and that it does not represent an explicit commitment to a specific path of interest.
As for the birth of Azar, he saw that the absence of clear signals to more reduction in the scheme may be explained as a “strict reduction”, while the continuation of two or more cuts in 2025 may lead the markets to explain the decision as a “doves” that supports the appetite of risk.
Expected market movements
Ahmed Azzam, head of research at the Ikoyette Group, said that the primary scenario for the movement of the markets is based on a reduction in the interest of 25 basis points, with a careful/conditional tone, in which case a limited decline in bond returns is expected for two years by about 5-10 basis points, with a limited tendency to flatten the return curve.
He added that the dollar may maintain its relative stability without an aggressive reintegration of the facilitation path, while the stocks selectively improve the leadership of the defensive sectors, along with a relative satisfaction with the banking sector with the exclusion of the violent reduction scenario by 50 basis points, while it is expected that gold tends to slightly ascend as a “insurance reduction” that does not weaken the dollar significantly.
Azzam explained that the “doves” scenario – which collects a reduction of 25 points with a clear hint to the “facilitation cycle” – may push the revenues of short -term bonds to drop at a deeper pace (10-20 basis points), and leads to a curved congestion, and a wider weakness of the dollar, which supports the currencies of commodity and emerging markets, and gives growth shares and periodic shares a strong boost, in exchange for possibilities of pressure on margins Banks, while gold has the best bullish momentum with the support of the decline in the American currency.
As for the less likely scenario – reduced by 50 basis points – Azzam saw that it may ignite sharp fluctuations in the markets, starting with a jump in the prices of bonds in the short term and a rapid decline in the dollar with the risks of later re -pricing if the data does not confirm this scenario, while the shares may jump first before the movement is overturned if the move is interpreted as a sign of tension in the form of the economy, and gold may shine strongly.
The birth of Azar, the financial market analyst at XTB MENA
For his part, Milad Azar, the financial market analyst at Xtb menaThe scenario known as “strict reduction” may lead to sales pressure on stocks, especially those circulating near record levels, if the decision is understood as a precautionary step without a clear facilitation path.
He added that the markets will be more sensitive to the distribution of the reduction over the coming years within the “points plan”, which will determine whether or not the current reduction supports the appetite for risk.
In turn, Michael Brown, the chief research strategy in PepperstoneThe challenge lies in the fact that the markets are already priced on 75 basis points until the end of the year, and a final rate at 3% by mid 2026, which puts a high ceiling for investor expectations, the federal may not be able to reach.
He warned that any reduction is not in line with these expectations, or brings a more conservative Powell tone, may lead to a correction in the pricing of the return curve, and presses the high -risk assets.
