Judging from the Federal Reserve's interest rate resolution, a sharp 50 basis points interest rate cut in September 2024 is more aggressive than many market participants and analysts expected. This move not only shows that the Fed is adjusting its monetary policy stance, but also highlights its deep concern about the current economic situation. The monetary policy statement made it clear that recent inflation data gave policymakers confidence in achieving their long-term inflation target of 2%, providing the basis for the Fed to take bolder action to cut interest rates. However, the driving force behind this decision is not only the fall in inflation, but also the Federal Reserve's great emphasis on the job market.

This interest rate resolution shows that the Fed's response function has undergone a significant change, and the focus has gradually shifted from the previous policy direction of suppressing inflation to paying more attention to the health of the job market. We believe this is a strong signal that the Fed has a very low tolerance for rising unemployment. Policymakers are clearly unwilling to take any risk in undermining what they describe as a "soft landing" prospect. This view was further bolstered by comments from Powell, who made it clear at a post-meeting press conference that the Fed would closely monitor the performance of the job market and could trigger more rate cuts in the future if the unemployment rate exceeds 4.4%.

This policy attitude indicates that until there is no obvious signal of stability in the job market, the Fed will maintain a "dovish" stance and be prepared to take more easing measures to ensure that the economy continues to move towards a soft landing. This stance is in sharp contrast to the Fed's "hawkish" stance over the past year in response to high inflation and reflects a shift in policy priorities.

Looking forward, as the Federal Reserve adopts more significant interest rate cuts, the possibility of achieving a soft landing for the economy in the short term has increased. A soft landing means reducing inflation to target levels without significantly damaging economic growth while keeping the job market robust. The Fed clearly hopes to use this rate cut to prevent the economy from slowing down too much and thereby avoiding a recession or a sharp increase in unemployment.