Looking ahead to the Fed's rate cut: historical lessons and future prospects

Today, the global financial market is focused on the upcoming monetary policy meeting of the Fed, among which the expectation of rate cut is particularly strong. Looking back at history, the Fed has only cut interest rates by 50 basis points twice in its nearly four decades of history, corresponding to the Internet bubble burst crisis in early 2001 and the beginning of the subprime mortgage crisis in 2007. These two actions undoubtedly demonstrate the Fed's decisiveness and determination in dealing with extreme economic challenges.

However, at the beginning of most interest rate cut cycles, the Fed has adopted a more prudent 25 basis point adjustment strategy. This not only reflects the gradualness of its monetary policy adjustments, but also reflects its efforts to seek balance in a complex and changing economic environment. Therefore, based on this historical law, at the meeting at 2 a.m. today, the market generally expects the Fed to adopt a more traditional 25 basis point rate cut as a signal to start the rate cut cycle.

The symbolic significance of this rate cut is far greater than the actual economic impact in the short term. It marks that the Fed has officially entered the interest rate cut channel, conveying to the market its cautious attitude towards economic growth prospects and preventive measures against possible risks in the future. Against the backdrop of increasing global economic uncertainty, this move will undoubtedly inject confidence into the market and provide necessary liquidity support for global economic recovery.