jakiro
Jessy, bitchain vision
In the early morning of September 18, Beijing time, the Federal Reserve announced a 25 basis points cut from 4.25%-4.50% to 4.00%-4.25%.This is the first rate cut since December 2024.
The extent of the interest rate cut this time is basically in line with expectations. In the subsequent speech by Federal Reserve Chairman Powell, he also clearly pointed out that this is a risk-management rate cut.
In summary, Powell’s speech, in the short term, the inflation risk in the United States will tend to rise and employment risk will tend to fall. The US economy is facing a complex situation, and the weakening of the labor market and inflation still coexist at a high level, which brings challenges to monetary policy formulation.
After the interest rate meeting, all parties have different views and predictions on the frequency of subsequent rate cuts. The Fed’s interest rate forecast “Dot Map” shows that of the 19 officials, 9 officials are expected to cut interest rates twice (50 basis points cumulatively), 6 officials are expected to cut interest rates only once (25 basis points), 2 officials are expected to cut interest rates by a total of 50 basis points (25 basis points twice), 1 official advocates a significant cut of 150 basis points, and 1 official is expected to cut interest rates no longer within the year.
According to CME’s “Federal Observation” data as of the 18th, the probability of the Federal Reserve maintaining interest rates unchanged in October is 12.3%, and the probability of cutting interest rates by 25 basis points is 87.7%; the probability of maintaining interest rates unchanged in December is 0.9%, the probability of cutting interest rates by 25 basis points is 17.6%, and the probability of cutting interest rates by 50 basis points is 81.6%.
In other words, the overall market expects that the Fed will also cut interest rates this year.
Rate cuts by 25 basis points, a risk-management operation
The Fed chose a modest range of 25 basis points mainly to achieve “gradual testing and data-driven” policy adjustments in complex economic situations.The United States is currently facing the dual pressure of inflation still at a high level and the labor market is marginally weakening. If a rashly cut interest rates may trigger a rebound in inflation, and being completely calm may lead to further deterioration of employment.Therefore, a small interest rate cut can not only bring certain relief to market and financial conditions, but also prevent excessive easing of policies.
The so-called “risk management-style” interest rate cut means that the core purpose of this action is to deal with economic downward risks, rather than to fully relax policies.The Commission provides space for the future through limited scope adjustments and flexibly determines subsequent paths based on economic data.Powell stressed that the rate cut was to prevent the impact of the economic slowdown on employment, rather than to indicate that the inflation problem has been resolved.This method shows that the Federal Reserve will still adopt a data-oriented policy strategy in the future.
At the same time, there are differences within FOMC on the number of future interest rate cuts.Median expectations show that the federal funds rate may drop to 3.6% by the end of the year, and two more interest rate cuts are required, but the opinions of the committee members vary greatly, with both those who advocate deeper declines and those who are more cautious.This disagreement further confirms the “testing nature” of the rate cut, and the market’s interest rate futures pricing also shows that investors generally expect the Fed to adopt a continuous small rate cut, but has not yet regarded long-term easing as inevitable.
The current rate cut is similar to that in 2019, when market assets performed
The rate cut has obvious similarity in pattern to the Fed’s rate cut cycle in 2019.In 2019, the Federal Reserve repeatedly adopted a 25 basis point slight interest rate cut to cope with slowdown in global growth and trade uncertainty, with the aim of managing economic downturn risks rather than a one-time large-scale shift to easing.Both reflect the gradual adjustment strategy of “from tight to relax”, and both emphasize that the market is highly sensitive to subsequent paths.
After the interest rate cut cycle in 2019, the performance of various assets showed certain rules.In terms of the stock market, the S&P 500 has risen overall driven by multiple interest rate cuts, rising from its low point at the beginning of the year.
In 2019, Bitcoin rebounded sharply from its low point at the beginning of the year in the first half of the year. After the epidemic in 2020, Bitcoin experienced a longer and larger bull market under large-scale monetary easing and fiscal stimulus.Therefore, experience shows:In the early stages of interest rate cuts, risky assets, including crypto assets, may rebound with improved sentiment and liquidity recovery, but true sustained rise often requires stronger liquidity injection or the cooperation of large-scale quantitative easing policies..Therefore, a simple interest rate cut of 25bp may not immediately trigger a long-term bull market for crypto, unless monetary and fiscal policies are further amplified.Crypto assets and Bitcoin rebounded in the early stages of interest rate cuts, but the formation of a long-term bull market also relies on larger monetary easing and support from the macro environment.
Gold performed well in 2019, benefiting from uncertainty and interest rate cut environment.Nonferrous metals and industrial commodities rely more on fundamentals and real demand, and their price trends are differentiated.
Overall, interest rate cuts usually have short-term benefits for risky assets, but not without risks.When facing a single slight interest rate cut, investors should pay more attention to the subsequent policy path and changes in economic fundamentals.For crypto assets and Bitcoin, a single rate cut may lead to short-term sentiment improvements, but a real long-term bull market requires the joint action of multiple factors such as liquidity, inflation expectations and institutional demand.
For investors, gold is still the most stable investment target next, and if the Fed really cut interest rates twice this year as expected, then crypto assets will generally fluctuate and rise this year.
