Markets Anticipate Federal Reserve's First Rate Cut Since 2020

The size of the cut remains uncertain as Wall Street debates between a 25 or 50 basis point reduction amid cooling labor market and moderating inflation.

• The Federal Reserve is expected to cut interest rates next week for the first time since the pandemic began in 2020.
• Financial markets are divided, with nearly equal odds on a 25 basis point cut versus a 50 basis point cut.
• Former New York Fed President Bill Dudley supports a larger cut due to signs of a weakening labor market.
• Recent economic data shows inflation nearing pre-pandemic levels, while the job market shows signs of cooling.
• Some experts argue that a larger cut could signal economic distress, while others see it as a necessary step toward normalizing rates.

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