| The moment the Federal Reserve announced a substantial interest rate cut, Wall Street traders were immediately excited.
Judging from the results, Powell won because the market did not fluctuate significantly. But the Fed's stake was its "credibility," and the market will have a hard time trusting the Fed for a long time. For the Fed, if it loses its reputation, it loses everything.
The answer is out: half of the people were wrong about a 50 basis point rate cut.
The Federal Reserve chose the combination of "dovish rate cut + dovish dot plot + hawkish speech", and everyone was wrong.
The whole meeting was full of surprises:
1. Adjustment of the wording of the policy statement
New Commitments: In addition to the commitment to return inflation to 2%, the statement added that the Committee would be “strongly committed to supporting maximum employment.”
On inflation and employment: Job gains have slowed and inflation has “made further progress” but remains somewhat elevated.
Even though the rate cut was 50 basis points, it was still a united event, with only one Fed official voting against it (Bowen advocated a 25 basis point cut), but this was the first time a Fed official dissented since September 2005. As far as we know, at least three officials supported a 25 basis point cut, but in the end only one official opposed it. It seems that Powell convinced many people at the last minute.
2. “Dot Matrix” Accident
The median of the "dot plot" shows that a total of 100 basis points of interest rate cuts will be made before the end of this year, which means two remaining 25 basis point interest rate cuts. It is expected that a total of 200 basis points of interest rate cuts will be made by the end of 2025.
But nine officials expect a 75 basis point or lower rate cut in 2024, and these people think there will be only one 25 basis point rate cut before the end of the year - this is not in line with common sense. One possibility is that these nine officials support three 25 basis point rate cuts this year, and Powell persuaded them to vote in favor of this meeting, but it cannot influence their forecast of the rate cut this year. The voting of the "dot plot" is secret.
But traders are more aggressive than the Fed, betting that the Fed will cut interest rates by about 123 basis points by the end of this year, and another 50 basis point cut this year. In a few days, traders are expected to push their rate cut expectations to the maximum - believing that there will be two more 50 basis point cuts this year.
3. Unexpected Powell news release
The first major interest rate cut of 50 basis points did not send a clear signal to the market.
Speech highlights:
The Fed does not have any preset path, and the Fed will continue to make decisions on a meeting-by-meeting basis, with no clear rules for determining the size of rate cuts (implication: while it started with a big rate cut, 50 basis points should not be seen as a new pace)
There is nothing in the forecast to suggest the Fed is rushing, and the Fed does not believe it is behind the curve (the implication: this is a “precautionary” rate cut).
The Fed will have two more jobs reports before its next meeting (read: two more jobs reports to base its decisions on).
We are not declaring victory in the fight against inflation, as housing inflation is decelerating more slowly than we expected (subjective: don’t expect big rate cuts to follow).
4. Unexpected market trends
Gold, US stocks, and US Treasury bonds rose after the policy statement was released, but fell after the Powell news was released. Gold rose 1.2% to $2,600 at one point, but then gave up the gains and hit the lowest price we calculated that day, 2,546, as Powell warned the market not to regard the 50 basis point rate cut as a new rhythm. #美联储宣布降息50个基点 #美国大选如何影响加密产业？ #token2049 #BTC走势分析
