The relationship between crypto assets and macro factors. The Federal Reserve announced a 25 basis point rate cut on Wednesday, which was in line with market expectations. However, Fed officials made a substantial upward revision to the median target range for future policy rates and raised inflation expectations for next year and the year after, predicting only two rate cuts next year.
Powell said the decision to cut rates this time was quite difficult. The Federal Reserve faces a balanced risk in achieving its dual objectives of controlling inflation and promoting employment, and some progress has been made in controlling inflation. Although rates have already been cut by 100 basis points, they are still significantly constraining economic activity, and the Federal Reserve is continuing on the path of rate cuts. However, they want to see more progress on inflation before further cuts.
Additionally, Powell mentioned that the new U.S. government's policies have not yet officially been introduced, but the Federal Reserve has already done quite a bit of preparatory work. Once they see specific policies, they will conduct a more careful and thoughtful assessment and develop appropriate policy responses.
Powell also stated that the U.S. economy appears to be quite strong overall, having made significant progress towards the goals set by the Federal Reserve over the past two years. The labor market, while cooling from an overheated state, remains robust. Inflation levels are also closer to the Federal Reserve's long-term target of 2%. Even if next year's inflation rate only drops to 2.5%, the Federal Reserve may still cut rates next year because inflation is moving in the right direction.
Just as Powell hinted that the pace of rate cuts would slow, the U.S. stock market experienced a decline. The Dow Jones Industrial Average may fall for the 10th consecutive trading day, which would be the longest streak of daily declines since October 1974 when it fell for 11 consecutive trading days. All 11 major sectors of the S&P 500 are declining, with the real estate sector leading the drop.
However, some remain optimistic about next year's rate cuts. Kathy Bostjancic, Chief Economist at Nationwide Mutual Insurance Company, said next year’s focus will be on Trump. Based on their forecasts of potential anti-inflation trends, they expect the Federal Reserve to cut rates by another 75 basis points next year.