On September 13, "Fed Whisperer" Nick Timiraos wrote that Fed Chair Powell faces a tough decision: should the first rate cut be 25 basis points or 50 basis points?

This week's CPI report, showing strengthening housing costs, dampened the prospects for a 50 basis point rate cut next week. However, another report on Thursday showed that the Fed's preferred inflation gauge, the core PCE price index, may have been more moderate in August. Meanwhile, job growth in June and July was weaker than initially reported, while August saw an improvement in job growth. Economic expectations next week are equally important: the Fed's quarterly economic projections, which will be released at next week's meeting, could further complicate the picture. These projections will reveal how many rate cuts officials anticipate this year.

Economist Foster, who served as a senior advisor to Powell, said that the number of rate cuts in the coming months will be more significant than the size of the first move. The dot plot released next week isn't the final outcome of the committee's deliberations, but it could be as important to investors as the size of the rate cut, especially if officials opt for a smaller cut. Since the market currently anticipates more than 100 basis points of rate cuts this year, a smaller-than-expected rate cut could lead to a market correction, tightening financial conditions and raising borrowing costs even as the Fed lowers short-term rates.