Don't sleep too deep tonight, the big one is coming! !
25 basis points: If the Fed chooses to cut interest rates by 25 basis points, it may be regarded as a "hawkish" behavior, because it is different from the market's expectation of 50 basis points. Such a decision may cause the market to face huge losses, especially those investors who have bet heavily on a 50 basis point rate cut. 50 basis points: If the Fed cuts interest rates by 50 basis points, although it is in line with market expectations, if the subsequent actions lag behind market expectations, it may cause panic and lead to a tightening of financial conditions again. In addition, such a sharp interest rate cut cycle may mean that the economy is in trouble, but the current economic forecasts and corporate earnings expectations are still relatively optimistic, which may create a contradiction.
2. Market reaction and risks
Severe market shocks: Whether the Fed chooses to cut interest rates by 25 basis points or 50 basis points, the market may experience severe shocks. Because the market has formed a strong expectation of a 50 basis point rate cut, any decision that does not meet this expectation may trigger market fluctuations. Asset price revaluation: If the Fed's interest rate cut is inconsistent with market expectations, it may lead to a reassessment of asset prices. For example, if the rate cut is smaller than expected, it could cause asset prices such as stocks and bonds to fall.
