The Federal Reserve has made a tough decision with heavy news

25 basis points or 50 basis points? The answer seems to be out.

On Thursday and Friday, the Wall Street Journal and the Financial Times published the news that "a 50 basis point rate cut is still an option", which triggered a big discussion on a 50 basis point rate cut. However, neither of these two articles gave a clear answer, but only listed the reasons why a 25 basis point and a 50 basis point rate cut are both reasonable.

But today, Bloomberg News published an article titled "The World is Ready for the Fed's Rate Cut" written by senior economic editor Craig Stirling, which revealed many signals.

We at Bloomberg Economics believe that Federal Reserve Chairman Powell supports a 50 basis point rate cut. However, New York Fed President Williams did not send a clear signal before the pre-meeting silent period, which makes us think that Powell did not have the support of the entire committee.

First, Bloomberg has always been a media outlet that speculates on a 50 basis point rate cut by the Federal Reserve, but it now believes that Powell's view of a 50 basis point rate cut has not been supported by all internal members. Dissent has been rare during Powell's tenure as Federal Reserve Chairman. From the perspective of the Federal Reserve, all members may support a 25 basis point rate cut, but it is impossible for all members to support a 50 basis point rate cut.

Second, the reason why this article believes that the Federal Reserve will not cut interest rates by 50 basis points is the speech of New York Fed President Williams, who was the last official to speak before the silent period. The last official who spoke did not send a clear signal, and there were obviously internal differences. Williams' speech at the time: It is appropriate to cut interest rates now, and there is no idea whether it should be cut by 25 or 50 basis points.

Bloomberg published such an article at a time when the "50 basis point rate cut discussion" was popular. It may be that it got first-hand information, indicating that the Federal Reserve has made a difficult decision. However, there is another possibility that the news from Bloomberg came from other senior officials of the Federal Reserve, not Powell. Powell passed on the "rumor of a 50 basis point rate cut" through the news media to let the market fully digest the rumor, forcing other Federal Reserve officials to agree to a 50 basis point rate cut.

In addition, the Federal Reserve will almost certainly announce a 25 basis point rate cut on September 18 (2:00 a.m. September 19 Beijing time), which will be the beginning of a gradual easing cycle.