Global markets await Fed decision

Global financial markets are on edge as the U.S. Federal Reserve is expected to announce a rate cut on Wednesday, leading to heightened volatility. While major brokerages anticipate a 25 basis points reduction, market sentiments suggest a possibility of a 50-bps cut to kickstart the easing cycle. CNBC Africa hosted Maarten Ackerman, Chief Economist at Citadel, and Neil Wilson, Chief Market Analyst at Finalto, to offer insights on the Fed decision and its implications. Neil Wilson noted the market's shift towards a 50-bps cut despite recent data pointing towards a smaller reduction. He emphasized that the pace and depth of future rate cuts are more crucial in determining the market sentiment than the initial move. Wilson cautioned that a significant cut could lead to inflation concerns and speculated that the Fed might opt for a 25-bps decrease given current circumstances. On the other hand, Maarten Ackerman highlighted that the Fed's decision between a 25 or 50-bps reduction would shape market expectations and behaviors in the short term. While acknowledging the marginal impact of the initial cut in the long run, Ackerman suggested that a 50-bps decrease might send a signal of urgency, whereas a 25-bps cut could be viewed as a more cautious approach. The conversation delved into concerns about the Fed potentially waiting too long to act and the risks of falling behind in addressing economic challenges. Ackerman underscored the importance of monitoring inflation trends and job market dynamics to gauge the need for rate adjustments. Wilson echoed the sentiment, acknowledging the Fed's efforts to balance economic indicators and market expectations while avoiding a reactionary approach. Shifting focus to South Africa, Ackerman discussed the country's inflation figures and the possibility of rate cuts by the South African Reserve Bank in tandem with the Fed's decision. He highlighted positive trends in inflation drivers such as transport fuel costs and currency strength, indicating favorable conditions for future rate adjustments. Wilson analyzed the impact of rate cuts on equities, bonds, and foreign exchange markets, cautioning against potential corrections in equities if the US economy heads towards a recession. The discussion concluded with insights on the importance of central bank messaging, historical trends in soft landings, and the key factors to watch for in the Fed's announcement, including rate projections, unemployment rates, and inflation forecasts.