The Fed's interest rate cut preheating in November is mainly driven and influenced by several factors. The following is a detailed analysis:
1. Economic data and market expectations
When deciding whether to cut interest rates, the Fed mainly relies on economic data, especially inflation and employment data. The strong performance of non-farm payrolls in the United States in September showed that the economy is still resilient and did not show the obvious signs of slowing down that the market had previously expected. This strong employment performance indicates that although expectations for interest rate cuts still exist, the magnitude and frequency may not be as aggressive as the market expected before. Therefore, the market expects that the Fed may only cut interest rates by 25 basis points in November, and this probability has risen to 86.3%.
2. Inflationary pressure and geopolitical risks
At present, the main challenge facing the Fed is still to control inflation at the target level of 2%. New York Fed President Williams said that he hopes to see the US economy achieve a "soft landing", that is, the economy continues to grow without causing excessive inflation. At the same time, geopolitical risks (such as the situation in the Middle East) may cause energy price fluctuations, thereby affecting the inflation level. The Fed needs to take these factors into consideration and make adjustments without affecting economic growth.
3. Flexibility of monetary policy and market response
Fed Chairman Powell and other officials have repeatedly stressed that their policies will be adjusted flexibly based on economic data rather than following a preset route. The Fed's recent policy dot plot shows that there may be a 25 basis point rate cut in the remaining two meetings this year. This gradual rate cut strategy is intended to avoid excessive easing and prevent possible asset bubbles and market instability.
Summary
The Fed is likely to cut interest rates in November, but the magnitude will be relatively mild to cope with the current complex economic environment and market pressure. The adjustment of the magnitude and frequency of rate cuts will depend on economic data released in the next few weeks, especially inflation and labor market performance. Markets and investors need to pay close attention to these data to determine whether the Fed's policy direction will change further.
