Finance
The Fed’s biggest interest rate call in years happens Wednesday. Here’s what to expect
Federal Reserve Chairman Jerome Powell takes a question from a reporter during a news conference following a Federal Open Market Committee meeting at the William McChesney Martin Jr. Federal Reserve Board Building on July 31, 2024 in Washington, DC.
Andrew Harnik | Getty Images
For all the hype that goes into them, Federal Reserve meetings are usually pretty predictable affairs. Policymakers telegraph their intentions ahead of time, markets react, and everyone has at least a general idea of what’s going to happen.
Not this time.
This week’s gathering of the central bank’s Federal Open Market Committee carries an uncommon air of mystery. While markets have made up their collective mind that the Fed is going to lower interest rates, there’s a vigorous debate over how far policymakers will go.
Will it be the traditional quarter-percentage-point, or 25-basis-point, rate reduction, or will the Fed take an aggressive first step and go 50, or half a point?
Fed watchers are unsure, setting up the potential for an FOMC meeting that could be even more impactful than usual. The meeting wraps up Wednesday afternoon, with the release of the Fed’s rate decision coming at 2 p.m. ET.
“I hope they cut 50 basis points, but I suspect they’ll cut 25. My hope is 50, because I think rates are just too high,” said Mark Zandi, chief economist at Moody’s Analytics. “They have achieved their mandate for full employment and inflation back at target, and that’s not consistent with a five and a half percent-ish funds rate target. So I think they need to normalize rates quickly and have a lot of room to do so.”
Pricing in the derivatives market around what the Fed will do has been volatile.
Until late last week, traders had locked in on a 25-basis-point cut. Then on Friday, sentiment suddenly shifted, putting a half point on the table. As of Wednesday afternoon, fed funds futures traders were pricing in about a 63% chance of the bigger move, a comparatively low level of conviction against previous meetings. One basis point equals 0.01%.
Many on Wall Street continued to predict the Fed’s first step would be a more cautious one.
“The experience of tightening, although it seemed to work, didn’t work exactly how they thought it was going to, so easing should be viewed with just as much uncertainty,” said Tom Simons, U.S. economist at Jefferies. “Thus, if you’re uncertain, you shouldn’t rush.”
“They should move quickly here,” Zandi said, expressing the more dovish view. “Otherwise they run the risk of something breaking.”
The debate inside the FOMC meeting room should be interesting, and with an unusual division among officials who generally have voted in unison.
“My guess is they’re split,” former Dallas Fed President Robert Kaplan told CNBC on Tuesday. “There’ll be some around the table who feel as I do, that they’re a little bit late, and they’d like to get on their front foot and would prefer not to spend the fall chasing the economy. There’ll be others that, from a risk management point of view, just want to be more careful.”
Beyond the 25 vs. 50 debate, this will be an action-packed Fed meeting. Here’s a breakdown of what’s on tap:
The rate wait
The FOMC has been holding its benchmark fed funds rate in a range between 5.25%-5.5% since it last hiked in July 2023.
That’s the highest it’s been in 23 years and has held there despite the Fed’s preferred inflation measure falling from 3.3% to 2.5% and the unemployment rate rising from 3.5% to 4.2% during that time.
In recent weeks, Chair Jerome Powell and his fellow policymakers have left no doubt that a cut is coming at this meeting. Deciding by how much will involve a calculus between fighting inflation while staying mindful that the labor market has slowed considerably in the past several months.
“For the Fed, it comes down to deciding which is a more significant risk — reigniting inflation pressures if they cut by 50 bps, or threatening recession if they cut by just 25 bps,” Seema Shah, chief global strategist at Principal Asset Management, said in written commentary. “Having already been criticized for responding to the inflation crisis too slowly, the Fed will likely be wary of being reactive, rather than proactive, to the risk of recession.”
The ‘dot plot’
Perhaps just as important as the rate cut will be the signals meeting participants send about where they expect rates to go from here.
That will happen via the “dot plot,” a grid in which each official will signal how they see things unfolding over the next several years. The September plot will offer the first outlook for 2027.
In June, FOMC members penciled in just one rate cut through the end of the year. That almost surely will accelerate, with markets pricing in the equivalent of up to five, or 1.25 percentage points, worth of cuts (assuming 25 basis point moves) with only three meetings left.
In all, traders see the Fed hacking away at rates next year, taking off 2.5 percentage points from the current overnight borrowing rate before stopping, according to the CME Group’s FedWatch gauge of futures contracts.
“That feels overly aggressive, unless you know the economy is going to start to weaken more significantly,” Zandi said of the market’s outlook. Moody’s expects quarter-point cuts at each of the three remaining meetings this year, including this week’s.
Economic projections
The dot plot is part of the FOMC’s Summary of Economic Projections, which provides unofficial forecasts for unemployment, gross domestic product and inflation as well.
The biggest adjustment for the SEP likely will come with unemployment, which the committee almost certainly will ratchet up from the 4.0% end-year forecast in June. The jobless rate currently stands at 4.2%.
Core inflation, pegged in June at 2.8% for the full year, likely will be revised lower, as it last stood at 2.6% in July.
“Inflation appears on track to undershoot the FOMC’s June projections, and the higher prints at the start of the year increasingly look more like residual seasonality than reacceleration. A key theme of the meeting will therefore be a shift in focus to labor market risks,” Goldman Sachs economists said in a note.
The statement and the Powell presser
In addition to adjustments to the dot plot and SEP, the committee’s post-meeting statement will have to change to reflect the expected rate cut along with any additional forward guidance the committee will add.
Released at 2 p.m. ET, the statement and the SEP are the first things to which the market will react, followed by the Powell press conference at 2:30.
Goldman expects the FOMC “will likely revise its statement to sound more confident on inflation, describe the risks to inflation and employment as more balanced, and re-emphasize its commitment to maintaining maximum employment.”
“I don’t think that they’re going to be particularly specific about any kind of forward guidance,” said Simons, the Jefferies economist. “Forward guidance at this point in the cycle is of little use when the Fed doesn’t actually know what they’re going to do.”
The uranium trade’s shelf life may last years.
According to Sprott Asset Management CEO John Ciampaglia, a “real shift” upward is underway due to increasing global energy demand — particularly as major tech companies look to power artificial intelligence data centers.
“We’ve been talking about uranium and nuclear energy non-stop for four years at Sprott, and we’ve been incredibly bullish on the segment,” he told CNBC’s “ETF Edge” this week.
Ciampaglia’s firm runs the Sprott Physical Uranium Trust (SRUUF), which Morningstar ranks as the world’s largest physical uranium fund. It’s up 22% over the past two months.
The firm is also behind the Sprott Uranium Miners ETF (URNM), which is up almost 38% over the past two months. The Sprott website lists Cameco and NAC Kazatomprom JSC as the top two holdings in the fund as of June 12.
“It’s [uranium] a reliable form of energy. It has zero greenhouse gases. It has a very good long-term track record,” Ciampaglia said. “It provides a lot of electricity on a large scale, and that’s right now what the grid is calling for.”
Ciampaglia finds attitudes are changing toward nuclear energy because it offers energy security with a low carbon footprint. Uranium is “incredibly energy-dense” compared to most fossil fuels, he said, which makes it a promising option to ensure energy security.
He cited the 2022 energy crisis in Europe after Russia cut its oil supply to the region and April’s grid failure in Spain and Portugal as cases for more secure energy sources.
“We think this trend is long term and secular and durable,” Ciampaglia said. “With the exception of Germany, I think every country around the world has flipped back to nuclear power, which is a very powerful signal.”
‘You need reliable power’
VanEck CEO Jan van Eck is also heavily involved in the uranium space.
“You need reliable power,” he said. “These data centers can’t go down for a fraction of a second. They need to be running all the time.”
His firm is behind the VanEck Uranium and Nuclear ETF (NLR), which is up about 42% over the past two months. According to VanEck’s website as of June 12, its top three holdings are Oklo, Nuscale Power and Constellation Energy.
But he contends there’s a potential downside to the uranium trade: Building new nuclear power plants can take years.
“What’s going to happen in the meantime?” Van Eck said. “Investors are not patient, as we know.”
Van Eck also thinks it’s possible the Trump administration’s positive attitude toward nuclear power could fast track development.
He highlighted nuclear technology company Oklo during the interview. Its shares soared on Wednesday after the company announced it was anticipating a deal with the Air Force to supply nuclear power to a base in Alaska.
The agreement came not long after President Donald Trump in May signed a series of executive orders to rework the Nuclear Regulatory Commission, expedite new reactor construction and expand the domestic uranium industry.
“Trump controls federal land, so that’s not a NIMBY [not in my backyard] kind of potential risk,” said Van Eck. “They’re going to leverage that hard to start to show the safety of these newer, smaller technologies.”
Finance
Amazon is selling an $800 portable power station for $550, and shoppers 'love the mobile design and durability'
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Camping is a fun summer activity. What’s not fun is having no access to electricity. You can’t charge your phone, watch TV, or make your morning cup of coffee. Thankfully, portable power stations allow you to do all that and more. It’s literally like bringing along a giant battery for all of your electronics. Portable power stations are also good to have around your home in case of power outages.
There’s just the problem of price. Portable power stations are notoriously expensive, especially ones that have a larger energy storage capacity. The good news is that we were able to find a solid deal on a 1,056-watt-hour (or 1 kilowatt-hour) power station. This $800 Anker Solix C1000 Portable Power Station is $550 at Amazon for a limited time. At 31% off, you’re saving $250.
Anker Solix C1000 Portable Power Station, $550 (was $800) at Amazon
The Anker Solix C1000 features a power output of 1,800 watts, making it strong enough to handle multiple electronics and small appliances at once. It has 11total power ports. You get two USB-A and USB-C ports, a car socket, and six AC outlets. Additionally, it also functions as a night light and has a handle for easy carrying. It weighs about 28 pounds.
Now let’s talk about charging. There are two ways you can charge the Anker Solix C1000. The first way is just by plugging it into a standard AC wall outlet. Or if you have the portable solar panels (sold separately), you simply connect the wires and place the panels in the sun. When plugged into an AC outlet, your power station can be fully charged in about an hour. If you charge up with solar, it’ll likely take around two hours. The digital display on the front of the power station shows you the battery and charging status.
Shoppers have found multiple uses for this portable power station. “We bought it mainly for short power outages and to run our refrigerator, but it will have many other uses for sure,” one shopper said. “Just this past week, I had to do some repairs to our floating dock, and there is no extension cord long enough to reach, so I brought this Anker Solix C1000 and it powered our two saws and drills without any issue at all. It’s very cool and has lots of different outlets. Very impressive unit!”
Others say they get daily use out of it. “I love it. I use it every day. I am traveling and camping everywhere,” one shopper shared. “I use it to power a car mobile refrigerator, a little portable air conditioner, and of course, my iPhone and other electronics, and sometimes an electric stove. It can take on all tasks with no problem. I love the mobile design and durability.”
You don’t need to be ‘roughing it’ the next time you go camping. Consider grabbing the Anker Solix C1000 Portable Power Station to keep all your devices charged and bring along a few essentials for the kitchen or living room. You’ll feel like you never left home.
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