Mitsubishi UFJ: The Federal Reserve will cut interest rates by 50 basis points "hawkishly" tonight

Mitsubishi UFJ expects that the Federal Reserve will have a 60% probability of a "hawkish" 50 basis point rate cut tonight. Its guidance and information indicate that, given the focus of the dual mandate has shifted from high inflation to high unemployment, the FOMC is taking some precautionary measures to timely restore the monetary policy stance to neutral. It makes sense to cut rates by 50 basis points now, as the FOMC is making it clear to the market that they are being proactive rather than thinking they are behind the curve. This can be shown through the median of the 2024 dot plot, which implies a total rate cut of 100 basis points, with two more rate cuts in November and December, each by 25 basis points. In this scenario, Powell will indicate that the 50 basis point action is the Fed catching up with the situation, but also emphasize that the overall softness of the data is more important than the recent CPI performance