The Federal Reserve released the minutes of its September meeting, showing that there was no complete consensus on the 50 basis point rate cut. Most people think that a 50 basis point cut is more appropriate, but some people advocate a 25 basis point cut in a gradual manner, believing that this is more in line with the path of monetary policy normalization. The minutes also mentioned that if inflation can move towards the 2% target and the job market continues to be strong, the Federal Reserve may adopt a neutral monetary policy route in the future.


As soon as the news came out, U.S. stocks immediately rose across the board, with the S&P 500 index hitting a record high. Chinese stocks also rebounded, and the decline of the Nasdaq China Golden Dragon Index also narrowed. Today, it is generally believed that the possibility of the Federal Reserve cutting interest rates in November is almost zero, and it is expected that by the end of 2024, it will only be reduced by about 47 basis points, which is a significant reduction from the previous expectation.


Why did expectations change so quickly? There are several main reasons. First, non-farm data was extremely strong, with 254,000 new jobs added in September, far exceeding the expected 150,000. This result was indeed unexpected. Second, the election is approaching, and the two candidates are competing fiercely. Any move by the Fed may be accused of "helping to canvass votes", so they currently just want to maintain stability and avoid trouble. Third, the situation in the Palestinian-Israeli region has become tense again. Once the conflict expands, oil prices, commodity prices and inflation are likely to rise. How can the Fed not be worried?
In addition, the US CPI data for September is about to be released, and the market expects the year-on-year growth rate to slow down.

At the same time, both mortgage rates and 10-year Treasury yields have risen in the United States. Some experts believe that considering the strong performance of the US economy and the continued inflation, the Federal Reserve may only cut interest rates once more in the rest of the year, by about 25 basis points.

Conclusion:
In general, despite the disagreement within the Fed on rate cuts, the market has not changed its general direction of rate cuts, which is undoubtedly a positive for the stock market. However, the market's expectations for future rate cuts by the Fed have been lowered, and no major moves are expected in the short term. If you want to get a piece of the pie in this bull market, it's too late to cram at the last minute. It's better to find an experienced person to lead you so you can get started quickly. What impact will the rate cut have on the U.S. stock market? How will the Fed adjust its monetary policy in the future? How to interpret the neutral monetary policy route mentioned in the Fed's meeting minutes?


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