Investors are growing increasingly confident in an interest rate cut at the Federal Reserve's September meeting. However, the size of that cut — whether 25 basis points or 50 basis points — remains an open question. HSBC chief US economist Ryan Wang joins Morning Brief to discuss what the Fed's move may look like and some of the biggest factors impacting the decision.

Wang believes a 25-basis-point cut is the more likely outcome at the September meeting. He notes that while labor market conditions are cooling, there isn't an elevated rate of layoffs; thus, a 25-basis-point would be more suitable.

He explains, "In the back of the minds of FOMC policymakers, they do want to have a sense of where they might be headed before making that decision about pace. I think that's really what it comes down to — timing, how quickly you want to move policy into a stance that might be considered neutral or less restrictive on the overall economy, and you have to be forward-looking in a sense. But at the same time, if we don't really see that loss of business confidence... if instead, all we're really seeing is a less frantic pace of hiring, which is how Powell put it, then I think you have a little bit more time to be cautious, to move incrementally."

Wang stresses the importance of labor market data, highlighting that it has "changed how the Fed is thinking about the balance of risks with respect to inflation."

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This post was written by Melanie Riehl