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FOMC decision — What to know in markets Wednesday

Heidi Chung
Reporter

The Federal Open Market Committee (FOMC) will deliver its policy decision at 2 p.m. ET Wednesday, and many are expecting the central bank to cut short-term interest rates for the first time in over a decade, even as recent data pointed to a strong U.S. economy.

Consensus among economists is that the FOMC will announce a 25 basis point cut on Wednesday.

“We expect the FOMC to cut its target rates by 25bp at the July meeting, lowering the target range for the federal funds rate to 2.00-2.25%,” Nomura wrote in a note Thursday. “The strengthening of recent data and comments from FOMC participants generally support a 25bp cut next week, as opposed to 50bp. We do not believe the economy is on the brink of a recession.”

Though a 25 basis point cut is what most economists expect, some have still not ruled out the possibility of a 50 basis point cut. “We maintain our call for a cut 50 bps on communication, not data. The June FOMC shifted our Fed view a lot, UBS wrote in a note Wednesday. “Chair Powell clearly wants to cut rates; in public comments, he and the core of the FOMC have ignored or downplayed strong data and highlighted weak data.”

Even though the GDP data released Friday was stronger-than-expected, it likely reinforced the Fed’s decision to cut interest rates. “What does this all mean for the Fed? Support for the cut,” Bank of America Merrill Lynch said in a note Friday. “The recent data and revisions showed growth momentum to be weaker, particularly investment which they are most worried about, and core PCE inflation is a touch softer.”

Meanwhile, the biggest companies reporting earnings tomorrow include Credit Suisse (CS), Dine Brands (DIN), Fiat Chrysler (FCAU), General Electric (GE), Humana (HUM), Molson Coors (TAP), Spotify (SPOT) before market open; plus Qualcomm (QCOM), The Cheesecake Factory (CAKE), and Twilio (TWLO) after market close.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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