Commerzbank: What will the Federal Reserve's meeting offer today?

Foreign exchange market analyst at Commerzbank, Volkmars Power, stated in a research note released today, Wednesday, that it would be miraculous for the U.S. Federal Reserve to make another decision other than reducing interest rates by 25 basis points at the end of the Federal Open Market Committee meeting this evening.

However, it may be beneficial to monitor the trends in the U.S. interest rate cut cycle moving forward; if the Federal Reserve does not confirm that no prior decision was made starting from the January meeting, this scenario should indeed materialize.

This will largely depend on the statements by U.S. Federal Reserve Chairman Jerome Powell regarding a potential pause in January and what the projections indicate for the entirety of 2025.

Markets now expect that the U.S. Federal Reserve may only cut interest rates twice over the entire next year; while the central bank was still anticipating four rate cuts for 2025 according to the latest forecasts.

In this regard, the economic analyst added that the Federal Reserve reducing these forecasts to three cuts might be reasonable; noting that there is room for maneuver to do more than the market currently expects and reduce the number of expected steps in the upcoming Federal forecasts.

Therefore, these possibilities will depend on Jerome Powell's tone during the press conference this evening, which might affect market pricing and could pressure U.S. dollar trading.