02:19 PM EST, 12/17/2024 (MT Newswires) -- The Federal Open Market Committee is widely expected to lower the target range for the federal funds rate by 25 basis points to 4.25% to 4.50%, so the focus will be on any updates to the Summary of Economic Projections and comments from Federal Reserve Chairman Jerome Powell that hint at the future path of rate reductions.

The FOMC's statement following Wednesday's meeting is due for release at 2:00 p.m. ET, with Powell's press conference scheduled for 2:30 p.m. ET.

The CME FedWatch Tool currently shows a 95.4% chance being priced in for a 25-basis-point rate reduction and a 4.6% chance of no change from the current 4.50% to 4.75% rate.

Fed officials have generally signaled their intent to lower interest rates further, but have been mixed on whether another reduction is appropriate at this week's meeting after a combined 75 basis points of easing over the previous two meetings given that the labor market remains strong and the pace of inflation is still above target.

Powell himself said on Dec. 4 that the strength in the economy allows the FOMC to be "a little more cautious" when lowering rates. He added that the FOMC cannot make policy decisions based on anticipated actions by the incoming Trump administration, saying that it would need to wait to see actual legislation to determine its impact.

Officials have also said that the pace of rate reductions will slow as the range moves closer to the neutral level. As a result, market participants will be watching updates to the SEP closely to see how many rate cuts are predicted for 2025 and beyond.

In the September SEP update, the median expectation was for 100 basis points of rate reduction in 2025, ending the year at 3.4%, then a further 50 basis points of reduction in 2026 to end at 2.9% and staying there through 2027. Analysts expect that the year-end figures could be adjusted higher.

Changes to the FOMC's statement are expected to be limited, while Powell's comments are expected to balance between emphasizing the strength of the economy and the continued emphasis on incoming data to determine monetary policy actions with a hint of cautiousness.

"Taking a look at the language used in the most recent FOMC statement, we do not see much reason for the description of economic activity to change much," Jefferies said in a research note. "Overall, the economy continues to grow at a solid pace, and while labor market indicators aren't quite as strong as they were earlier in the year, they have not deteriorated to the point that they have become troublesome."