The Fed's loose monetary policy may face new changes. St. Louis Fed President Musalem said in an interview that the weakness of the US economy may exceed expectations, and the labor market is also not optimistic, which sends a strong signal of accelerating interest rate cuts.
Musalem mentioned that if the US economy is indeed so weak, it would be appropriate to accelerate the pace of interest rate cuts. This view is consistent with the current background of gradually cooling inflation and approaching the Fed's 2% target. Under such circumstances, the market's expectations for the Fed's interest rate cut in November are increasing.
Traders are betting that the Fed may cut interest rates again by 50 basis points in November. Interest rate futures contracts show that the probability of a 50 basis point cut in November is as high as 54%. This expectation not only reflects the market's expectations for the Fed's loose policy, but also reveals investors' concerns about the economic outlook.
It is worth noting that while expectations of a Fed rate cut are rising, the European Central Bank may also take aggressive interest rate cuts. Phil O'Donagho, an economist at Deutsche Bank, said in his latest report that the European Central Bank may join the interest rate cut. This news further intensified the market's attention to the global interest rate cut trend.
Overall, the expected rate cuts by the Federal Reserve and the European Central Bank have had a profound impact on global financial markets. Investors should pay close attention to the policy trends of these two central banks to formulate reasonable investment strategies and respond to market fluctuations. At the same time, they also need to pay attention to other economic data and policy changes to fully grasp market dynamics.
