The latest decision from the Federal Reserve conveyed the following key messages:
1. The federal funds rate remains unchanged, with no plans for rate cuts at this time.
2. A potential for two rate cuts within 2025 is anticipated, with a total reduction of approximately 50 basis points.
Trump expressed dissatisfaction with this, publicly criticizing the Federal Reserve for not cutting rates, and even suggested that he should be in charge of the Federal Reserve.
Personal opinion: Since 2023, the Federal Reserve has entered a rate-cutting cycle, initially adopting a preemptive approach to address potential economic risks. This year, the pace of rate cuts has slowed, mainly due to the robust fundamentals of the current U.S. economy. Based on historical experience, the Federal Reserve usually cuts rates under three circumstances:
1. Preemptive rate cuts to prepare for the future;
2. A significant drop in U.S. stocks, necessitating market stabilization;
3. Substantial economic issues arise, requiring stimulus for growth.
Currently, none of these three conditions have been fully triggered, so it is entirely normal for the Federal Reserve to slow down the pace of rate cuts. The market generally expects two more rate cuts within the year, but the specific timing may be delayed until September or even later, depending on economic data performance.
It is recommended that investors closely monitor inflation indicators such as CPI and PCE, as well as employment data, to grasp future policy trends.
