Fed's Powell is definitely a master of expectation management and a good dealer.
Powell has two core goals for this rate cut: ① Start rate cuts ② Avoid letting the market fall into recession expectations.
Without Powell's expectation management, the market discussion will still revolve around the two buttons of "rate cut" or "no rate cut". Rate cuts are naturally good, but the market will have relatively large fluctuations after each rate cut, and the stock market will fall soon. The market is worried that a recession is coming. However, the current market discussion has completely shifted to 25bp or 50bp, and some voices are calling for 75bp. The "no rate cut" button has been deducted. In this way, if the rate cut is 25bp, the market will not think that a recession is coming. A rate cut of 50bp is likely to be interpreted as a recession.
Based on the above logic, I still think that there is a high probability of a 25bp rate cut. The significance of 50bp or 75bp is just a bait for expectation management.
For the market situation, there is not much difference between a 25bp or 50bp rate cut. The most important thing is the significance of "starting rate cuts" itself. The Federal Reserve is the central bank of the world's central banks. Once the Federal Reserve starts to cut interest rates, it means that the global market will enter a loose cycle, and other countries can cut interest rates more confidently and boldly.
For the market, we'd better pray for a 25bp interest rate cut and a steady rise. Healthier.
Powell's expectation management reminds me of a little story: What if you want to open a window on the wall of the neighbor's house? If you directly ask for a window, you will definitely be rejected. Then you can talk about opening a door first, and pretend to compromise at the end: a compromise solution, open a window, both sides can accept it.
For the market, the difference between a 25 or 50 interest rate cut is not that big. The most important thing is the meaning of "starting interest rate cuts" itself. The Federal Reserve is the central bank of the world's central banks. Once the Federal Reserve starts to cut interest rates, it means that the global market will enter a loose cycle, and other countries can cut interest rates more confidently and boldly. For the market, we'd better pray for a 25bp interest rate cut and a steady rise. Healthier.
Powell's expectation management reminds me of a little story: What if you want to open a window on the wall of the neighbor's house? If you directly ask for a window, you will definitely be rejected. So you can talk about opening a door first, and then pretend to compromise at the end: a compromise solution, open a window, both parties can accept it.
