The Federal Reserve might cut rates by a quarter point instead of half a point. Markets care deeply about this. Markets also thought GameStop was worth $483 per share.
Financial journalists have discovered that a few hundredths of a percentage point could determine the entire trajectory of monetary policy. They've written thousands of words about whether Jerome Powell will choose 25 basis points or 50 basis points. They've consulted charts. They've interviewed economists. They've done everything except acknowledge that retail traders will lose money either way.
The headline promises all eyes will turn to producer and consumer price reports. All eyes. Every single eye in the financial markets, laser-focused on inflation data that gets revised three times after publication and bears no resemblance to what anyone actually pays for eggs.
Somewhere right now a day trader is calculating his position size based on whether the Fed cuts by 0.25% or 0.50%. He's running the numbers. He's stress-testing scenarios. He's building a spreadsheet with conditional formatting. His account will be worth $1,847 regardless of which rate the Fed chooses, because he'll panic-sell during the press conference when Powell clears his throat weird.
Markets vacillate between which way policymakers are leaning. That's the word they used. Vacillate. As if the S&P 500 swinging 200 points on a Tuesday represents thoughtful deliberation rather than algorithms executing trades faster than human consciousness can register price changes.
The difference between 25 and 50 basis points is 0.25%. Your mortgage rate rounds to the nearest eighth. Your savings account pays 0.01% after fees. But sure, this quarter-point distinction will reshape the economy.
The Fed will announce a number. CNBC will call it historic. Retail traders will buy weekly options. The options will expire worthless. Then everyone will wait for the next number that definitely matters this time.
Photo by Markus Spiske on Unsplash
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