Late at night! Federal Reserve, big news!
This week, the global financial market entered the "Super Central Bank Week", and the Federal Reserve's interest rate decision became the focus of the market. The market generally expects the Federal Reserve to announce a rate cut on September 19, Beijing time, but the key question is the extent of the rate cut. At present, the market expects a 50 basis point rate cut probability of 59%.
This expectation has triggered a chain reaction in the financial market. The Dow Jones Index hit a record high on the evening of September 16, the US dollar index fell, and the yen rose against the US dollar, breaking through the key psychological level of 140. Gold prices also soared to $2,589.69 per ounce against this background, setting a new high.
Other central banks around the world, including the Bank of Japan, will also announce interest rate decisions this week. The market expects that the Bank of Japan will not raise interest rates this month and may take action at the end of the year, which may lead to a further narrowing of the interest rate gap between the United States and Japan.
The reasons for the Fed's rate cut include slowing inflation, falling inflation expectations, and a cooling labor market. At present, some core inflation indicators are close to the Fed's 2% target, and the market's expectations for future inflation are also declining, showing confidence in the Fed's ability to achieve its inflation target. Meanwhile, there are signs of a cooling in the labor market, such as rising defaults on auto loans and credit cards.
There are risks in rate cut decisions. If only a 25 basis point cut is made, there may be a risk of more weak economic data in the future. A 50 basis point cut could affect long-term Treasury yields, which in turn could affect mortgage rates and the real estate market.
Greg Ip, a senior reporter at the Wall Street Journal, called for a 50 basis point cut, arguing that the current economic environment supports the move, and noted that if only a 25 basis point cut is made, there may be more challenges in the future. Financial institutions predict that if the Fed initiates a rate cut cycle, gold prices may rise further, possibly reaching $2,700 per ounce by the end of the year.
The Fed's interest rate decision will have a significant impact on global financial markets, and market participants are closely watching its movements to make corresponding investment decisions.
