11:06 AM EDT, 09/18/2024 (MT Newswires) -- The US Federal Reserve rate cut on Wednesday will likely be 25 basis points, Macquarie said in a note.

Still, the Fed will likely "issue a dovish message, via the 'dots' and Jay Powell's discourse," said Macquarie analysts Thierry Wizman and Gareth Berry. "If we are wrong, and the Fed cuts by -50bps, we expect that the 'dovish' implication will be offset by guidance (from Powell) for -25 bps rate cuts for the last two [Federal Open Market Committee] meetings of the year."

US retail sales data on Tuesday didn't increase the probability of a 50 basis point cut, the note said.

"US retail sales (0.2%, month-over-month, nominal) didn't slip below the recent trend-line, and thereby pointed to Q3 real personal consumption expenditures that may be in the neighborhood of 3.0%," the analysts said. "So final sales to domestic purchasers may also hold up in the US Q3 GDP report."

"There's a clear slowdown in US activity taking place, but it is still concentrated in labor-market indicators, rather than in the consumption indicators broadly," the note said.

"So long as consumption doesn't falter, there is a risk that the labor market recovers before consumption falters. That would hurt the credibility of a Fed that cuts the policy rate too aggressively at the start of the easing cycle," the analysts said.