US Fed Rate Hike: A Week of Uncertainty

Earlier this week, after the release of the US CPI report, the market was almost certain that the Fed would cut rates by 25 basis points this month. However, the situation took a sharp turn on Thursday.

Former New York Fed President Dudley argued that the Fed had reason to cut rates by 50 basis points next week. The Wall Street Journal, known as the "Fed's mouthpiece," and the Financial Times also reported that the Fed faced a tough choice between a 50 basis point and a 25 basis point cut. This led to a significant increase in market bets on a larger Fed rate cut next week, with a 50/50 chance.

Next week will see several key events:

• Monday 20:30: US September New York Fed Manufacturing Index
• Tuesday 20:30: US August Retail Sales Monthly Rate
• Wednesday 14:00: UK August CPI Monthly Rate, UK August Retail Price Index Monthly Rate
• Thursday 2:00: Fed releases interest rate decision and economic projections summary
• Thursday 2:30: Fed Chair Powell holds a press conference on monetary policy
• Thursday 20:30: US Initial Jobless Claims for the week ending September 14th, US September Philadelphia Fed Manufacturing Index
• Friday 11:00: Bank of Japan announces its interest rate decision
• Friday 14:30: Bank of Japan Governor Haruhiko Kuroda holds a press conference on monetary policy