Original | Odaily Planet Daily (@OdailyChina)
Author｜Nan Zhi (@Assassin_Malvo)
The Federal Reserve's interest rate decision will be announced at 02:00 on September 19 (next Thursday). The interest rate cut is a foregone conclusion, but the extent of the September rate cut is still undecided. The current market generally believes that if the Federal Reserve chooses to cut interest rates by 50 basis points, it implies the risk of economic recession. How do institutions view the extent of the September rate cut, and how do they predict the market trend after the rate cut? Odaily will summarize the answers in this article.
How much did it drop in September? How many times did it drop this year?
Reuters poll: 91% of economists surveyed believe that the interest rate will be cut by 25 basis points, and there will be 3 interest rate cuts this year
A Reuters survey showed that most economists surveyed believed the Federal Reserve would cut interest rates by 25 basis points at each of the remaining three policy meetings in 2024, and only 9 of 101 economists expected the Fed to cut interest rates by 50 basis points next week.
"The jobs report, while weak, was not catastrophic," said Stephen Stanley, chief U.S. economist at Santander. "Neither Williams nor Waller on Friday provided clear guidance on the pressing question of a 25 basis point versus a 50 basis point cut on September 18, but both offered relatively benign assessments of the economy that, in my view, point strongly toward a 25 basis point cut."
Sixty-five of 95 economists polled said the Fed will cut rates two more times this year, by 25 basis points each in November and December, after next week's meeting. That compares with 55 of 101 economists polled last month.
"Federal Reserve mouthpiece": prefer 25 basis points as a start
Nick Timiraos, the "Federal Reserve mouthpiece," said in response to Waller's speech that Waller did not explicitly mention a "25" or "50" basis point rate cut in his speech, but tended to support starting with 25 basis points, and explicitly reserved the option of accelerating rate cuts "as appropriate" if "new data" showed further deterioration.
Sumitomo Mitsui Banking Corporation: 50 basis points
Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Banking Corporation in Tokyo, said the slightly weaker-than-expected U.S. jobs report will not prompt the Federal Reserve to cut interest rates by 50 basis points at its September meeting. However, combined with past revisions, the result means there is a chance that the Fed could cut rates by 50 basis points, depending on indicators beyond next month.
Nomura Securities: 3 interest rate cuts this year
"Since the Fed has decided to wait, it may need to cut rates more sharply, but the U.S. macroeconomic outlook remains quite resilient," said Andrzej Szczepaniak, an economist at Nomura Securities. "Now everything depends on the labor market."
Andrzej Szczepaniak predicts the ECB will cut rates again this month and once more before the end of the year. He said the Fed could also take three actions this year and that markets may be too optimistic that the Fed will do more than the ECB.
The impact on stocks appears to be more related to when expectations of lower interest rates solidify than when they actually happen - so the Fed's boost to stocks may be over.
Saxo Markets: 25 basis points, 50 basis points would cause some panic
Charu Chanana, global market strategist and head of foreign exchange strategy at Saxo Markets, said that overall, the message conveyed by global data is very clear, that is, we are entering a period of economic slowdown.
"My inclination is a 25 basis point cut, there is no reason to panic," Chanana said. "If the Fed cuts 50 basis points right away, there might be some panic. I think they will use very dovish language and leave room for a 50 basis point cut in November or December if necessary. A 25 basis point cut coupled with very dovish rhetoric will make up for not cutting 50 basis points now."
How do institutions view the trend after the interest rate cut?
Bitwise: Once uncertainty is eliminated, the market will start to rise
Bitwise Chief Investment Officer Matt Hougan expects cryptocurrencies to see significant gains once the current macro uncertainty begins to dissipate in October and November, saying that "markets hate uncertainty, and there is a lot of uncertainty in the market right now."
At this stage, while the consensus is that the Fed will cut rates, the likelihood of a 50 basis point cut in September has decreased. However, with Wednesday's CPI data and the key Fed meeting next week approaching, the likelihood of a cut of more than 125 basis points by December has increased.
BlackRock: If the interest rate is cut by 50 basis points, it may be a big problem
Jeffrey Rosenberg, a senior portfolio manager at BlackRock, said the danger is that if the Fed eases by 50 basis points this month, it could signal concerns about the economy rather than reassuring that policymakers are acting in time to avoid a recession.
10x Research: If the interest rate is cut by 50 basis points, something bad could happen × 2
10x Research said that if the Federal Reserve cuts interest rates by 50 basis points on September 18, the so-called bullish liquidity easing cycle could have an adverse impact on risk assets including cryptocurrencies.
A 50 basis point rate cut next week could mean heightened economic concerns or a lagging position in responding to an impending slowdown, leading investors to scale back their exposure to risky assets like BTC and stocks.
MN Trading: Bitcoin valuation is cheap, economic recession will be a bull market catalyst
Michaël van de Poppe, founder of MN Trading, posted on X that he does not think there will be a major crash in BTC in 2024.
We are actually on the verge of the ‘final’ run of the equity bull market, and the likelihood of a major stock market crash is much greater, which could drag down Bitcoin.
But Bitcoin's valuation relative to the S&P 500 suggests the market may be replicating the 2019-2020 bull cycle, where we fell 35% from all-time highs relative to the S&P. This means Bitcoin will rise until March-April 2025, then a period of consolidation/correction, and then rise to 2026, peaking at some point in 2026, depending on liquidity and the macroeconomic competitive environment during that period. Given the impact of ETFs, I also think the estimated price now will be higher than everyone expects.
A recession or weakening economy can be a catalyst for a bull market cycle as investors may seek alternative economic systems.
BCA: Historical patterns show that the economy will decline after interest rate cuts
Peter Berezin, chief global strategist at BCA Research, recently wrote that investors should prepare for a potential recession in the US economy because the Federal Reserve may not be able to save the economy and investors' strategies must change accordingly.
Previously, the economy fell into recession within months of the central bank starting to cut rates in January 2001 and September 2007. Even if the Fed does provide more accommodation than is currently priced in, the impact would only be with a lag.
If the Fed fails to prevent a recession, the S&P 500 is expected to fall sharply and the P/E ratio will also decline. To prepare for a recession, investors are advised to buy bonds.
