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Jessy, bitchain vision
The interest rate settlement meeting is imminent. US President Trump said that the Fed will implement its first easing policy in nine months at this meeting, and he expects the Fed to “sharp interest rate cuts.”
On September 10, the latest report released by the U.S. Bureau of Labor Statistics said that the U.S. PPI data in August was completely inferior to expectations and turned negative unexpectedly on a month-on-month basis, the first time in four months, which further supported the reason for the Federal Reserve to cut interest rates.After the data was released, traders stepped up their bets on the Fed’s 50 basis points cut in September.According to CME’s “Federal Observation”, the probability of the Fed’s interest rate cut by 50 basis points in September rose to 10%, and the probability of a 25-point rate cut is 90%.As expectations for interest rate cuts heated up again in September, U.S. stocks also hit new highs.
The rate cut seems to have become a foregone conclusion. The author believes that this rate cut is more likely to be a cautious reduction of 25 basis points.Will the United States continue to cut interest rates after the rate cut, and will the crypto bull market continue?
Why is it more likely to be a 25 basis point cut?
Although US President Trump calls for a “significant rate cut”, that is, 50 basis points or more, and some traders are betting on this, the general consensus in the market (the probability of CME data shows is 90%) is still 25 basis points.This is a “hawkish rate cut”, that is, while the Fed takes loose action, it also tries to manage the market’s future expectations and avoid showing excessive panic.They tend to adjust gradually, look at data while walking, leaving room for future policies.
It is more likely to be a 25 basis point drop because at present, the core inflation indicator has fallen significantly from its peak, but it may still remain stubbornly in the 2.5%-3.0% range, slightly higher than the Fed’s 2% long-term target.This gives the Fed reason to begin to relax its over-restrictive policies, but dare not be too fast or too fierce.
And the first rate cut this year is of great symbolism.Cutting interest rates by 25 basis points, while maintaining careful wording in post-meeting statements is the safest way to start easing and prevent over-excitation from happening.The launch of a 50 basis point interest rate cut will be interpreted by the market as serious economic problems, which may cause panic.
The first rate cut will open a slow and cautious easing cycle.The market should not expect to return to the era of zero interest rates during the epidemic.More likely scenarios are a 25 basis point cut every other meeting (or quarterly).
The pace and end point of subsequent interest rate cuts will depend entirely on whether inflation can successfully fall to the 2% target.If inflation data recurs, the Fed may pause or even reassess the rate cut channel.
For the Trump administration, in the context of slowing economic growth, it is certainly happy to see a lower interest rate environment, which will help reduce the interest burden on government debt and boost consumer and corporate confidence before the election cycle.Therefore, it is likely that the Trump administration will still support the Federal Reserve in launching a rate cut in public or privately.
The short-term trend after the expected cash
The opening of the interest rate cut cycle will definitely be a major structural benefit to risky assets, including crypto assets.The first interest rate cut in 2025 was actually carried out against the background of confirming the lifting of the inflation threat and the need for economic support. Its signal significance is stronger and its impact is far-reaching.First of all, the risk-free interest rate (such as treasury bond yield) that serves as the anchor for pricing all assets will enter a downward channel, directly increasing the valuation of long-term assets such as stocks and real estate.The decline in the attractiveness of holding cash or bonds will drive large-scale funds out of hedging tools such as money market funds and redistribute them into risky assets.Reduced borrowing costs will improve the profit margin of the company and stimulate new capital investment, thereby boosting market expectations for future profits.
When the most likely rate cut of 25 basis points occurs, because the rate cut is widely expected, the most likely situation is the market after the boot is landed. As the market has digested the expectation of a 25 basis point interest rate cut in advance, for example, the US stock market has hit a new high. At the moment the news is officially announced, risky assets may not experience sharp sharp rises, but may experience a brief pullback or fluctuation due to the settlement of some profit-taking orders.The market focus will quickly shift to the Federal Reserve’s post-meeting statement and Powell’s speech, looking for clues about future interest rate cuts.
If the Fed unexpectedly cut interest rates by 50 basis points, or sends a very clear signal that it will continue to cut interest rates in the statement, it will far exceed market expectations, and risky assets may rise rapidly in a short period of time.But it will soon fall, and the future market will be more complicated, because a 50 basis point cut in interest rates will be interpreted by the market as serious economic problems, which will cause market panic.
Finally, there is a situation with the least possibility: although the Federal Reserve cut interest rates by 25 basis points, the statement is tough, suggesting that this is the last rate cut or the threshold for future interest rate cuts is high. The market will interpret it as a “hawkish rate cut”, and risky assets may fall in response.
As long as interest rate cuts by 25 points and releases a gradual rate cut in the future, in fact, crypto assets will continue to rise in the long run, especially if Bitcoin can rise and gain a foothold, the altcoin market is very worth looking forward to and may usher in a strong rebound.
For investors, in specific transactions, reduce leverage and prepare bullets to buy at the bottom when inserting the pin.
