The US has Entered a Monetary Easing Policy, Market Volatility May Further Increase| Matrixport Research

At 2:00 am on September 19, the Federal Reserve announced a 50 basis point rate cut, and the target range of the federal funds rate was reduced from 5.25%-5.50% to 4.75%-5.0%, and the loose monetary policy cycle of the United States officially began. This rate cut is the first rate cut since March 2020.

The market generally believes that the start of the rate-cut cycle is good for risky assets. After the rate-cut information was announced, gold, US stocks, and crypto assetsled by BTC, all rose to varying degrees.

The Federal Reserve will cut interest rates by 50 bp this year, and the market is still worried about the economic recession

The Federal Reserve dot plot shows that it is expected to cut interest rates twice more this year, totaling 50 bp, 4 times in 2025, totaling 100 bp, and 2 times in 2026, totaling 50 bp. The overall rate cut will reach 250 bp, and the interest rate will be 2.75–3%. The rate cut this time exceeded the expectations of many Wall Street investment banks. Historical data shows that the first rate-cut of 50 bp has only occurred in market emergencies, such as the technology bubble in January 2001, the financial crisis in September 2007, and the COVID-19 pandemic in March 2020.

Macro data expectations adjusted, the Fed’s confidence in curbing inflation has increased

Public information shows that the Fed has lowered its GDP growth forecast for this year from 2.1% to 2.0%, and has significantly raised its unemployment rate forecast from 4.0% to 4.4%. And it has lowered its PCE inflation forecast from 2.6 to 2.3%. The Fed’s adjustment of data expectations shows that its confidence in curbing inflation has increased, and the labor market is also a focus of the Fed. Overall, the first large-scale rate cut and the more hawkish rate-cut rhythm have brought an overall short-term boost to the market.

Market views on the impact of the Fed’s rate cut are polarized. It is still unknown whether the economy will have a soft landing or will amplify inflation and geopolitical risks. However, in the short term, market volatility and uncertainty will increase, and market trends will become more complex. Investors are advised to pay close attention to leading economic indicators such as employment data and control risks.

Disclaimer: The above content is for informational purposes and reference only. The content does not constitute investment advice. Digital asset transactions can be precarious and volatile. Investment decisions should be made after carefully considering individual circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.

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