Jerome Powell Has a Very Big Week

The Federal Reserve begins a highly anticipated two-day meeting on Tuesday in which the central bank is expected to cut interest rates for the first time in four years. The big question is whether the cut to its benchmark rate—currently between 5.25% and 5.5%—will be one of a quarter-point or a half-point, reports the Wall Street Journal.

• Current sentiment: A CNBC survey of economists, fund managers, and others in the industry shows that 84% expect a quarter-point cut and 16% expect the bigger cut.

• Potential for disappointment: Though investors have been clamoring for rate cuts for a while, a quarter-point cut has the potential to result in a rocky day on Wall Street—because the market in general seems to have already priced in the bigger half-point cut. As an analysis at the Economist notes: "Rate cuts ought to be good for the stock market. But not if investors have already pocketed their benefits."
• Balancing act: Inflation has been declining toward the Fed's target of 2%, but the once-sizzling labor market also has been cooling of late. "The key issue for them at this meeting is their sense of the balance of risks," William English, a former senior Fed adviser, tells the Journal. "If you are more worried now about growth and employment than inflation, then you might well want to take out a little bit of insurance" with the larger half-point cut. Much will depend on how Fed chair Jerome Powell guides the discussion on all of the considerations at play, the Journal notes.
• Decision time: The Fed will announce its decision at 2pm Eastern on Wednesday. Whatever happens, the central bank is expected to continue cutting rates at its November and December meetings, per CBS News. In the CNBC survey, most (74%) say the September cut comes in time to preserve a "soft landing," one that averts a recession, for the economy.

(More Federal Reserve stories.)