A heavy sword has no edge, and great skill is clumsy.
2024.9.14:
This Friday, market expectations for a 50 basis point rate cut by the Federal Reserve suddenly increased, reaching 50% as of press time, compared to only about 28% on Thursday. This change has driven US stocks higher, US Treasury yields generally fell, the US dollar fell, gold prices hit new highs, and $BTC also rose accordingly.
Against the backdrop of heightened market expectations for rate cuts, ING released an eye-catching report. The investment bank shifted from initially supporting a 50 basis point rate cut to supporting 25 basis points, and said that the Fed is unlikely to break the trend of dollar depreciation.
From 50 basis points to 25 basis points.
ING initially favored a larger rate cut in response to possible employment weakness. However, the recent employment report was not as weak as expected, with the core CPI rising 0.3% month-on-month in August, higher than expected. Against this backdrop, the bank said: "We have to admit that a 25 basis point rate cut seems to be the most likely outcome. The market also reflects this, and after the CPI was released, the market has already factored in a 30 basis point rate cut into the interest rate pricing." However, on Friday morning, traders began to bet on a larger rate cut on a large scale, and the debate over whether to cut by 25 basis points or 50 basis points intensified. Although the investment bank acknowledged that there were reasons for a 50 basis point rate cut, such as business surveys showing signs of slowing economic activity and hiring, and the Fed's Beige Book pointed out that only three Federal Reserve districts experienced "slight" growth in the past eight weeks, and the remaining nine districts had flat or falling output. However, given the composition of FOMC members and concerns about the possibility of continued firmness in inflation, the bank expects that "a slight majority may choose to cut by 25 basis points... Powell will take a relatively dovish stance at the press conference, suggesting that if the data deteriorates, a larger rate cut may be taken in the future." ING expects the Fed to cut interest rates by 100 basis points this year and another 100 basis points next year. Therefore, a 25 basis point rate cut next week would imply a possible 50 basis point rate cut at the November or December FOMC meeting, and a 25 basis point rate cut at each of the first four FOMC meetings through 2025, thereby keeping the cap on the federal funds rate at 3.5%.
