The FED’s interest rate decision is just around the corner! Currently, there’s a 55% chance of a 50 basis point cut and a 45% chance of a 25 basis point cut. Typically, such close probabilities would not be the case, and we would have a clearer idea of the rate decision. However, since this meeting will see a rate cut for the first time in years, the probabilities are very close and market sentiment is uncertain.
The WSJ article argues that the FED’s current interest rates are overly restrictive, noting that inflation has decreased and the labor market has weakened. The increase in unemployment and the delayed effects on housing and automotive inflation support this view.
However, despite these developments, it is suggested that a 25 basis point cut might make the FED’s intended “soft landing” strategy more achievable. #Token2049
At this point, what is crucial for investors is how this rate cut responds to the slowing inflation data and how it might balance potential weaknesses in the labor market.
Additionally, while interest rate cuts can act as a positive catalyst for economic growth and stock market performance, lower growth expectations may lead to short-term volatility in indices like the S&P 500. #FOMC
📊 This cut is expected to reduce yields in the bond market and exert upward pressure on equity valuations.
📊 Increased liquidity will lower corporate borrowing costs, potentially accelerating capital investments and M&A activities.
📊 However, excessively accommodative monetary policy could lead to a resurgence in inflation expectations.
📊 Therefore, it is crucial to closely monitor the macroeconomic indicators behind the Fed's decision; while a "risk-on" sentiment might emerge in the equity markets in the medium term, long-term risks still remain.
📊 Personally, I believe the Fed will implement a 25 basis point cut, as inflation data remains above target while the slowdown in the labor market indicates that a modest rate cut is necessary.
Besides the rate decision, the meeting will also include the release of economic projections, adding extra significance. Therefore, we can’t make specific predictions like “a 25 basis point cut would be positive, a 50 basis point cut would be negative” for this meeting.
If you plan to trade based on news flow, having a terminal like Refinitiv or Bloomberg to receive updates in seconds is crucial. Without such tools, you might experience delays and find yourself at a disadvantage compared to Wall Street's rapid responses. $NEIRO
Thus, focus on the long-term impacts of the rate cut, economic projections, and Powell’s statements rather than short-term effects, and adjust your portfolio accordingly. Personally, I believe that regardless of short-term fluctuations, this meeting will have a very positive long-term impact on the market. $BTC