The Fed probably wants to keep the market exactly where it is
The market has priced in a near-certainty of a cut today along with a 71% chance they will hold pat at the next meeting on Dec 11.
That pricing is probably where Powell would like to see the market finish the day. In an ideal world, they could cut today and not change guidance at all, leaving everything as it is.
However the statement itself is long and there are a multitude of communication risks. Then Powell will have to navigate a press conference.
Christopher Harvey, head of equity strategy at Wells Fargo Securities argues that Powell is due for a communication mishap.
"The last few times we heard him speak we got the distinct sense that the message he intends to convey is not always received as such by the markets," Harvey wrote in a client note. "When it comes to commentary, we believe that less is more," Harvey said. "Obviously, requiring a press conference for every Fed meeting suggests the Chairman holds a much different view. We shall see."
For me, the biggest risk is that the FOMC wants to push back against the idea of a continued easing cycle. But by doing that, they risk sending a hawkish message that sparks a risk-off trade.
