Fed Day: 25 or 50?

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Sept. 18. Fed Day. The Bottom Line segment of today’s podcast starts at (3:46) for listeners who want to skip ahead.

State of Play

As we eye our board of indicators for signs of direction at 0645, all is quiet ahead of the Fed interest rate decision this afternoon:

• Stock index futures are effectively unchanged, with no major US index moving more than 0.2% from the break-even point;

• Commodities are mixed. WTI crude oil is down 1.3% to trade around $69/barrel. Copper is up 0.6%;

• Bonds are moving just a bit lower ahead of the Fed. The 2-year yield is up 3 basis points to 3.62% whilst the 10-year is up 2bps to 3.67% (yields move inversely to prices);

• Cryptos aren’t doing anything. Bitcoin is trading around $59,800.

Today’s Known Events

Happy Fed Day. The Federal Open Market Committee, or FOMC, concludes its meeting today and announces its interest rate decision at 1400 ET. This will be accompanied by a policy statement and ‘dot-plot.’ Hopefully you are smart enough to realize this 'dot-plot’ just captures FOMC members’ views on interest rates at one moment in time and is not binding.

Anyway, the Fed is all but guaranteed to cut its key policy rate from its current perch of 5.25% to 5.5%. The only question is if it will cut by 25bps or 50bps. As of last night, Fed Fund Futures were pointing to it being 50bps, but only by a 61% to 39% margin. At last check this figure was 65%.