The big news this week will be a decision on interest rates from the U.S. Federal Reserve Board on Wednesday. Traders are probably giving a slight edge to a 50 basis point cut.

CIBC World Markets is more cautious with its Fed call, and expect the Fed to go 25 bps with markets taking a cue from the accompanying policy statement.

BMO Nesbitt Burns says the market is calling for 25 bps, with a 50% chance it will go for 50 bps. “We would expect equity markets to be disappointed with 25 bps and to register a relatively impressive response to a 50 bps cut. The bond market may not prove overly enthusiastic in response to a 50 bp cut, as participants are less disposed to wave away inflation risks and flows from bonds to equities may be taking place. However, with the passage of time, and another month of weak employment/production statistics in hand, the bond market may gravitate toward the view that Greenspan is correct, permitting the budding bond rally to flower this summer.”

RBC DS says that the Fed is going to opt for the more cautious 25 bps move. But economists at TD Bank say it depends. “Three reports due out early next week – new and existing home sales for May and consumer confidence for June – could influence the FOMC1s thinking. If, as we expect, these data confirm that U.S. consumer demand is slowing only moderately and consumer confidence is holding up reasonably well, the Fed will likely stick to 25 basis points. But, signs of significant weakness in any of these reports could prompt a 50 basis point move.”

All three reports are due out Tuesday, the first day of the two-day Fed meeting. BMO says, “We look for confidence measures to hold relatively steady in June and for existing/new home sales to be mixed at high levels. Durable goods bookings fell a huge 5% in April, but we think only a modest bounce-back is probable in May, with sustained weakness visible in technology equipment orders and in basic industrial bookings. Chicago1s June Purchasing ManagersÕ report is likely to stay well below the 50 mark.”

In Canada, central bank chief David Dodge is speaking on Tuesday. Industrial prices are due out Thursday, and GDP numbers are slated for Friday. BMO expects higher input prices, primarily due to higher energy prices. CIBC says the numbers will show, “GDP only inching forward by 0.1%, a tame enough result to encourage expectations for a Fed-matching quarter point cut when the Bank of Canada next meets.”

On the earnings front, it is expected to be another quiet week, except for the unexpected warnings that may hit. ATI Technologies is due to report Wednesday as is Sobeys Inc. Empire Company and Richelieu Hardware Ltd. are expected to announce results on Thursday.