This week, the main event in the market is the Federal Reserve meeting, where the regulatory body will announce its monetary policy decisions.

The question is not whether the Fed will cut interest rates, but by how much.

There are two possible outcomes: a 25 basis point cut or a 50 basis point cut.

This time, there is a divergence between analysts' views and market expectations, for reasons that are not clear.

Most brokerage firms, including JPMorgan and UBS, expect that Powell & Co. will opt for a smaller cut.

BlackRock also believes there is no reason to take more aggressive action.

Some even argue that a larger cut would be a mistake.

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10x Research recently stated that a 0.5% cut would indicate serious economic concerns.

However, expectations for a more moderate decision by the Fed triggered a market rebound last Friday.

It is not entirely clear why the regulatory body is taking this step.

From a macroeconomic perspective, there is hardly a convincing reason for a large cut.

Ideally, macroeconomics should guide such decisions.

Starting with inflation: although the CPI in August reached the expected 0.2%, core CPI rose by 0.3% (0.2% in July), exceeding the expected 0.2%.

In terms of the labor market, the number of new claims for unemployment benefits rose slightly last week, indicating that layoffs remain low.

For the week ending September 7, the number of initial claims for state unemployment benefits increased by 2,000 to 230,000, seasonally adjusted.

Economists expect 230,000 people to apply for unemployment benefits this week.

The acceleration of core inflation and the stable labor market should have settled the debate on a large rate cut.

In addition, analysts at the Bank for International Settlements urge the world's major central banks not to cut interest rates too quickly, depleting the rate buffer that has been built up in recent years.

However, according to data from the CME Group, the bond market has raised the possibility of a 50 basis point rate cut by the Fed to 61% for some unknown reason.

What if the base scenario occurs?

Typically, when regulatory bodies make decisions that do not align with market expectations, market sentiment may deteriorate.

We may also see the "buy the rumor, sell the news" effect.

Goldman Sachs expects XAUUSD to fall if the Fed only cuts rates by 0.25%.

Overall, most forecasts are not very optimistic about the investor response.