Wall Street on Edge: Fed's Crucial Rate Cut Decision Looms

Wall Street awaits a crucial Federal Reserve policy decision, with investors anticipating an interest rate cut amid fears of hawkish commentary. Uncertain economic data and leadership challenges at the Fed heighten anxiety. Traders look for clues on future easing, while U.S. stocks rally on lower rate expectations.

Wall Street's key indexes were set for a cautious opening Wednesday as investors brace for an anticipated Federal Reserve interest rate cut amid fears of hawkish commentary. The decision comes amid one of the central bank's most contentious meetings, as it seeks to balance supporting the labor market and curbing inflation.

The absence of fresh economic data due to a recent government shutdown and the uncertainty over who will head the Federal Reserve next year add layers of complexity to the situation. Current frontrunner for the position, White House economic adviser Kevin Hassett, is known for advocating rate cuts.

Investors have priced in an 89.9% probability of a 25 basis point cut according to CME's FedWatch Tool, while also eyeing potential further easing in 2026. Observers await critical insights from Fed Chair Jerome Powell's post-meeting press conference, particularly concerning future rate cuts. Throughout the week, AI sector earnings, notably from Oracle and Broadcom, will also hold significant market focus.

(With inputs from agencies.)