The probability of a 50 basis point rate cut has risen to 50%.

Former New York Fed Chair Dudley said there is "sufficient reason" to cut interest rates by 50 basis points next week, supported by recent comments from well-known financial journalists like Nick Timiraos from "Fedwire" Boosted, the market bet on the Fed cutting rates next week has risen to "fifty-fifty." The latest data from Fedwatch shows that traders in the swaps market now expect a 50% probability of the Fed choosing to cut interest rates significantly this month, up from 15% on Thursday. Market reaction was strong Earlier, the expectations for a rate cut on Friday had already risen significantly, and this positive news led to a strong rally in the US stock market, pushing the S&P 500 and Nasdaq Composite indexes to their largest weekly gains so far this year, up 4% and 6% respectively. The Nasdaq index had just experienced a sharp drop the previous week. Mark Dowding, Chief Investment Officer at RBC BlueBay Asset Management, also stated that with a 50 basis point rate cut now "very likely" after having been "almost fully priced in" on Thursday. Currently, the market still expects a 50% chance of a 25 basis point rate cut, but this market expectation has significantly decreased compared to Thursday's. Former New York Fed President Bill Dudley said on Friday that there is "sufficient reason" for a 50 basis point rate cut next week, emphasizing the restrictive impact of the current 5.25%-5.5% rate on economic growth, the highest level in 23 years. Historically, the Fed has typically adjusted rates by 25 basis points, but if officials believe there is a risk of the economy slowing too quickly, a 50 basis point rate cut may be taken as a precautionary measure. Tim Duy, Chief US Economist at SGH Macro Advisors, said, "For the Fed, the least regrettable path is to cut rates by 50 basis points first. This is the only logical policy choice." Gabriele Fo, fund manager at Algebris Investments, also said that the Fed "best... cuts rates in advance" rather than risk "lagging behind the curve" in a recession. Former New York Fed Chair William Dudley and economists like Michael Feroli of JPMorgan have also suggested that the Fed should cut rates further to avoid falling behind the curve. "We think the Fed should do clearly next week: cut the policy rate by 50 basis points to adjust to the changing risk balance." Uncertainty remains However, some analysts still remain cautious. Goldman Sachs believes that despite the growing expectations of a 50 basis point rate cut, the Fed is likely to cut rates by 25 basis points next week. Wednesday's Fed meeting is the last meeting before the November presidential election, with officials attempting to guide the US to a "soft landing" and suppress inflation without causing a recession. It is worth noting that this week gold prices hit historic highs and the yield on 10-year US treasuries reached a 15-month low, both of which can be seen as signals of economic deterioration. Some Fed officials have expressed concerns, believing that if a 50 basis point rate cut is implemented from the start, it could easily trigger market panic and not be conducive to managing market expectations and controlling inflation. In addition, the latest data shows that the overall inflation rate in the US has dropped to 2.5%, close to the Fed's target of 2%, but the core inflation rate, influenced by factors such as housing market pressure, has risen by 0.3%. Wylie Tollette, Chief Investment Officer of Franklin Templeton Investment Solutions, said, If inflation in the housing and related sectors continues to rise, a 50 basis point rate cut may accelerate or amplify this trend, and I expect the rate cut to be 25 basis points. Salman Ahmed, Global Macro Head at Fidelity International, believes that there is still a lot of uncertainty about the rate cut, "This is a cat-and-mouse game... We have started the rate cut cycle, but there are still many unknowns."