Studio Press

Last Tuesday, the Federal Reserve enacted an emergency 75bp rate cut as US stock market futures tumbled. Some saw the move as a complete panic reaction, and the central bank has essentially established that it will respond to the cries of the equity markets, despite the fact that monetary policy is intended to be used for the “pursuit of maximum employment, stable prices, and moderate long-term interest rates.” The big question now is: does the Fed follow the markets, or do the markets follow the Fed? Futures are pricing in an 86 percent chance of a 50bp cut to 3.00 percent on Wednesday, but what if traders are wrong? FOMC member Poole voted against the policy action last week, signaling that everyone may not be on board to aggressively cut rates. The impact of an unexpected decision on the markets - and especially the US Dollar - would be severe, but with the Fed clearly averse to stoking volatility it appears they will likely do as futures dictate.How much do you think the Federal Reserve will cut? Vote in our poll and discuss your opinion in the DailyFX