On September 17, 2024, construction work was completed around the Federal Reserve Building in Washington, DC.
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This report comes from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open keeps investors updated on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
from high to flat
Tuesday, S&P 500 Index and Dow Jones Industrial Average Both indexes closed flat Earlier set a record high same day. this Nasdaq Index Add 0.2%. European regional Stoxx 600 closed up 0.4%paring gains earlier in the day.
What to expect from the Fed
The Federal Open Market Committee meeting ends on Wednesday, U.S. time, and the Federal Reserve will announce its monetary policy decision. CNBC Jeff Cox breaks down What to expect from the meeting and what else investors should pay attention to, such as interest rate forecasts from Federal Open Market Committee (FOMC) members and a “dot plot” of their economic forecasts.
Survey indicates the Fed is expected to cut interest rates by 0.25%
the fed will Lower interest rates by a quarter of a percentage pointThat’s according to 84% of 27 respondents to the CNBC survey. Only 16% thought it would drop by half a percentage point. Survey respondents included economists, fund managers and strategists. By comparison, the Fed futures market is pricing in a 63% chance of a half-percent rate cut.
Artificial intelligence data centers also require investment
Microsoft, BlackRockinfrastructure investor GIP acquired by BlackRock and UAE technology investor MGX formed a group Called the Global Artificial Intelligence Infrastructure Investment Partnership. The organization aims to eventually raise $100 billion to invest in artificial intelligence data centers and energy to “power them in a sustainable way.”
(PRO) Gold shows no signs of slowing down
gold Prices keep rising. The precious metal’s price per ounce has risen nearly 26% this year, outpacing the S&P 500’s 18% gain. As the Federal Reserve cuts interest rates, gold, a non-interest-bearing asset, is expected to attract more investors’ attention. Gold’s rally looks set to continue.
bottom line
Hope vs. reality: This is the sentiment among market watchers as we count down the days to the Fed’s rate decision.
We know from historical data that the Fed typically adjusts interest rates in quarter-percentage increments.
Only when something terrible happens to the economy, such as when the dot-com bubble burst in 2001, do central banks cut interest rates by half a percentage point. The financial crisis broke out.
For now, data shows the U.S. economy is in good shape, although not as strong as it was a year ago.
Tuesday’s report showed retail sales rose 0.1% in August, beating the Dow Jones survey’s forecast for a 0.2% decline. In other words, the consumer that underpins the U.S. economy remains strong.
Without any red flags, it would be difficult for the Fed to justify a rate cut of more than a quarter of a percentage point.
But we can’t ignore the fact that interest rates are at a 23-year high. They are killing the labor market and small businesses. More importantly, inflation, which is why such high interest rates are implemented in the first place, seems to be under control.
That’s why some economists and analysts are hoping the Fed will cut interest rates by half a percentage point.
“They’ve achieved their mission of full employment and inflation back on target,” said Mark Zandi, chief economist at Moody’s Analytics. “I would expect them to cut rates by 50 basis points.”
“But I doubt they’ll cut 25 people,” Zandi added.
Perhaps investors shouldn’t pay too much attention to the Fed’s first rate cut. More importantly, look at the dot plot, which tracks Fed officials’ forecasts for where interest rates will be over the next few years. After all, hope is a long-term thing.
–CNBC’s Jeff Cox, Hakyung Kim and Samantha Subin contributed to this article.
