Stocks: Getting a Fix on the Fed

S&P looks at what's at stake for the market as Bernanke & Co. prepare to kick off their widely anticipated Sept. 18 policy meeting

Investors are walking on eggshells as they await the Sept. 18 decision by Federal Reserve policymakers. Will Ben Bernanke & Co. leave the target Fed funds rate at 5.25%, lower it by 25 basis points, or go even further by cutting it 50 basis points (one-half of 1%)? We believe the Fed will take the middle ground and cut by 25 basis points, likely doing the same thing at its Oct. 30-31 meeting and again at the Dec. 11 or Jan. 29-30, 2008, FOMC meetings. We believe that most Fed watchers are also eyeing a quarter-point cut on Sept. 18 and that this likely event has largely been built into U.S. equity prices.

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