Yesterday, the Fed announced another 25 basis point rate cut, which is about what we expected, but the market has already digested the benefits of this rate cut.
The reason for this decline is mainly due to Powell's hawkish remarks.
At the press conference after the interest rate meeting, Powell said: With this rate cut, we have lowered the policy rate by a full percentage point from the peak, and now our policy stance is not so tight.
So we can be more cautious when considering further adjustments to the policy rate.
He said that if the economy remains strong and inflation does not continue to move towards the 2% target, the Fed may slow down policy adjustments.
He also mentioned that interest rates are still "meaningfully" suppressing economic activity and the Fed is "on track to continue to cut interest rates."
But more progress must be seen in inflation before further rate cuts will be made.
The Fed also adjusted the number of rate cuts they expect to make in 2025, indicating that they are more cautious about the pace of continued rate cuts.
According to the latest dot plot, the Fed expects to cut interest rates twice in 2025, a total of 50 basis points, which is much lower than the four times predicted in September. This has dealt a certain blow to market sentiment and expectations of rate cuts.