The Federal Open Market Committee (FOMC) is set to release its highly anticipated statement and interest rate decision at 2 p.m. Eastern Time today. Following this, at 2:30 p.m. ET, Federal Reserve Chair Jerome Powell will take the stage for the post-meeting press conference, a crucial event that could shape market sentiment and economic outlook.

Key points:

1. 63% chance of a 50bps rate cut, 37% chance of a 25bps cut

2. Updated economic projections may show lower long-term interest rates

3. Market reaction will depend on Chair Powell's post-meeting comments

Key scenarios to watch:

1. If Chair Powell mentions any risks of a recession, markets could experience a sharp decline.

2. Should Powell emphasize that economic conditions are under control and signal readiness for aggressive rate cuts, risk assets, particularly in the cryptocurrency sector, may see significant upward momentum.

Several major financial institutions are already forecasting rate cuts between 1% and 1.25% for 2024. Combined with rising global liquidity, such cuts could inject substantial capital into higher-risk assets

As the FOMC meeting draws near, financial markets are bracing for what could be a pivotal moment in monetary policy. Market indicators suggest a 63% probability of a substantial 50 basis point rate cut, marking the first such reduction since March 2020. This anticipated move comes amid growing concerns over labour market weakness, despite assertions that the U.S. economy is not currently in a recession.

Claudia Sahm, a former Fed economist and creator of the "Sahm rule" recession indicator, predicts that the Federal Reserve will opt for the larger 50bps cut. Sahm emphasizes that recent labour market data, consistently pointing towards softening conditions, will likely drive the Fed's decision-making process. The central bank's dual mandate of price stability and maximum sustainable employment appears to be tilting towards addressing employment concerns, potentially overshadowing inflation worries in the short term.

All eyes will be on Powell's press conference, where his comments could significantly sway market sentiment. Investors will be parsing his words for any hints of recession risks or indications of the Fed's willingness to implement aggressive rate cuts in the future. Additionally, the Fed's updated Summary of Economic Projections, to be released alongside the rate decision, may reveal lower long-term interest rate expectations among Fed officials, potentially influencing market dynamics in the coming months..