The Fed is likely to alter borrowing costs in financial markets in a meaningful way only if it surprises. A quarter-point move is arguably already fully priced in and doing more early on would prevent attention from turning immediately to a discussion about the next cut.

Additionally, the Fed may have moved rates a notch too high in 2018, and the risk of unleashing excess price pressures appears to be very low given that inflation has repeatedly fallen short of the central bank’s 2 percent target.

If more negative economic data surface before month’s end, another technical argument will build momentum. The lower end of the federal funds target range is only 2.25%, limiting how much the Fed can cut if a recession emerges. When a central bank has so little room to maneuver, many economists, including New York Fed President John Williams, have long argued it should act aggressively when the economy begins to sour.

Fed Chairman Jerome Powell acknowledged the wisdom of that very argument at his June 19 press conference.

“That is a valid way to think about policy in this era,” he said. “It’s in the minds of policy makers during this era because it’s well understood to be correct.”

Yet Powell also cautioned against assuming this approach will necessarily influence officials at the Fed’s July meeting.

“Nothing I can say about that is specific to the near-term question that we face,” he said. A 50 basis-point cut, he added, was “something we haven’t really engaged with yet and it will depend very heavily on incoming data and the evolving risk picture.”

Arguments Against

Meanwhile, there are good arguments against a half-point move. If entirely unexpected, it could spook markets as investors might fret the Fed is more worried about the outlook than it’s been letting on. The economic situation also may not be dire enough to justify going large, especially given signs of tightness in the labor market.

It’s also a concern that the lower rates go, the higher the risk of spurring financial bubbles, a case made June 24 in an essay by Dallas Fed President Robert Kaplan.