The Fed cuts interest rates by 50 basis points: Analysis of the double-edged sword effect🔍
On Wednesday, the Fed's interest rate cuts were getting closer, but the two ends of the decision-making scale were undecided: should it cut 50 basis points bravely or take a cautious step of 25 basis points? 🤔
50 basis points, this number is often regarded as a signal flare in the easing cycle, but now is different from the past, the US economy has not revealed the haze of sinking. Therefore, 25 basis points seems to be a more stable option, but the Fed's final decision is still a mystery. 🤷♂️
Looking back at the long river of history, whenever the shadow of financial crisis and economic recession looms, the Fed always kicks off the easing with at least 50 basis points. But this time, the situation is quite similar to 1995, when in order to wake up the sleeping economic giant, the Fed only knocked on the door of easing with 25 basis points. 🚪
Indeed, this interest rate cut is very different from the starting point of the easing cycle in the past. In the past, it was the crisis that forced the Fed to take a gamble, but now, there is no sign of a financial storm. 🌪️
However, the market's sense of smell is always sharp. The federal funds rate futures market has smelled something unusual, and expectations of a 50 basis point rate cut have quietly heated up. Those who bet on a large rate cut may be holding the belief that "history repeats itself, but in different forms." After all, in the past ten easing cycles, the average decline in the federal funds rate was as high as 418 basis points, indicating that the Fed still has a lot of ammunition to play this time, so why not speed up? 🏃♂️
But please note that the front is not the abyss of recession, but an unknown landscape. If the Fed only takes a 25 basis point step, the "hard landing theory" may laugh at its lack of strength and late timing. Mr. Xu Bin holds a different view. He believes that before the next wave of data is released, 25 basis points are enough to demonstrate determination, and predicts that the new data will once again prove the resilience of the US economy. 💪
However, if the Fed really chooses to make a big move of 50 basis points, the risk of economic recession may be further reduced, but what will follow may be rising consumer prices and the expansion of asset bubbles. This is a game of risks and opportunities. How will the Fed choose? Let's wait and see!👀
