Three things to watch at the Fed's interest rate meeting next week

Bloomberg

After six weeks of market fluctuations, the US Federal Reserve should meet in a period of relative calm, at least if you do not count on a president spitting fire.

Inventories and bond yields rose this week. The 10-year Treasury yield

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experienced its largest increase since 2013.

The Fed is expected to reduce its benchmark interest rate by a quarter of a point in a range of 1.75% to 2%. This will be the second rate reduction in the summer.

Rumors of an emergency reduction of half a percentage point have declined, given that US economic growth is stable and that inflation is accelerating.

The reduction of a quarter point will be a "yawn". What will be more interesting, though, is if the Fed gives clues on the aftermath of things, said Avery Shenfeld, chief economist at CIBC Capital Markets.

The market has forecast another quarter-point cut at the Fed's December meeting, according to CME's FedWatch tool.

Here is an overview of what economists and investors will watch when the Fed concludes the two-day meeting on Wednesday.

Will there be a clear signal of another rate cut this year?

Economists are divided on this point. The best place to report a further reduction would be in the "dot chart," where Fed officials provide their own estimates to determine the level of the benchmark rate.

But for the midpoint to post another rate cut, many Fed officials will have to drastically lower their own rate projections. It's a big request eight Fed officials did not even plan a rate cut in June.

Scott Anderson, chief economist at Bank of the West, said he expects the point chart to project another quarter point cut in 2019.

If the point chart does not seem more flexible, it may be up to Powell to leave the door open for a new cut when he speaks to reporters.

press conference

In general, Powell should stick to the July message that the Fed is on a "soft" easing path, said David Wilcox, a former senior Fed official and now senior fellow at the Peterson Institute for International Economics. . Powell used the phrase "mid-term correction" in July, but may eliminate it. Whatever word is chosen, the Fed chairman is trying to make it clear that the economy is not in a recession where the central bank has to use "every piece of artillery in its arsenal," Wilcox said.

How many dissidents will there be?

Good economic data and rising bond yields could only be a slight majority in favor of rising rates. Four regional Fed presidents opposed the rate cut in July. Two presidents, Boston Fed President Eric Rosengren and Kansas City Fed President Esther George voted and dissented. They will do it again in September, said Diane Swonk, chief economist at Grant Thornton. Economists do not think there will be a dissent in favor of a half-point cut, although St. Louis Fed President James Bullard has urged the committee to make drastic cuts.