Investors are focused today on the U.S. Federal Reserve meeting, which is described as the most important event of the year for global markets. While global stocks remain calm and currencies and bonds trade in narrow ranges, anticipation builds ahead of the announcement that may set the course of monetary policy for the coming months.
Market Calm and Anticipation
U.S. equities showed little change, with global markets moving only slightly across most asset classes. Major U.S. indices hovered near record highs, while European stocks edged up 0.1% to recoup some earlier losses. The MSCI Asia Index held at an all-time high.
The U.S. dollar stayed near its lowest level since 2022, reflecting traders’ bets on a more accommodative Fed stance.
Potential Split Inside the Fed
Markets broadly expect a 0.25% rate cut, but the real debate centers on the statement’s tone and Fed Chair Jerome Powell’s press conference.
Recent history suggests possible divisions among committee members, amplified by the addition of Steven Miran—appointed by President Donald Trump—who may heighten internal disagreements.
Economic Data Pressures
- Inflation: Rose to 2.9% in August from 2.7% in July, indicating growing price pressures.
- Labor Market: The economy added only 22,000 jobs in August, versus expectations of 73,000, and unemployment climbed to 4.3%.
- Consumer Spending: Increased 0.3% for the second month, showing household resilience.
These factors put the Fed in a tough spot: inflation remains above target, yet a weakening labor market strengthens the case for easing.
Market Expectations
Futures markets price a 96.1% chance of a 25-basis-point cut, with just 3.9% expecting a larger 50-basis-point move.
Gold Shines
Gold has emerged as a key beneficiary, recently topping $3,700 per ounce before a slight pullback, boosted by a weaker dollar and mounting bets on monetary easing. Lower rates enhance gold’s appeal as a non-yielding asset compared to bonds or deposits.
Powell’s Crucial Speech
Observers expect Jerome Powell to adopt a dovish tone, highlighting labor market risks and signaling readiness for further cuts if necessary. Any less-accommodative hint, however, could trigger significant volatility across stocks, bonds, and currencies.
As the world awaits Powell’s remarks and the clues they provide about future policy, today’s Fed decision is a critical test of balancing the fight against inflation with supporting a slowing job market. Even a subtle shift in the statement’s tone could spark new waves of market turbulence, making this meeting a defining moment for global markets in 2025.