The rate cut speed has caused differences, and the market is betting on another 50 basis point rate cut in November

BlockBeats news, September 26, the Federal Reserve and Wall Street both believe that the recent 50 basis point rate cut is just the beginning, but the two sides disagree on how fast interest rates should fall. Fed policymakers insist on continuing to lower interest rates in a slow and steady manner. At the same time, the market seems to be betting that worsening economic conditions will force the Fed to move faster. The data will prove who is right.

With the completion of the sharp interest rate cut in September and in the absence of a recession, the Federal Reserve does not need to act in a hurry. The terminal interest rate for the rate cut is the neutral interest rate level, that is, the interest rate level that neither stimulates nor restricts economic growth. The median forecast of the so-called "dot plot" in September indicates that interest rates will be cut by 100 basis points this year and another 100 basis points by the end of 2025, reducing the target range to 3.25% to 3.5%. Fed Governor Kugler said: "While future actions will depend on the data we receive on inflation, employment, and economic activity, if conditions continue to evolve in the direction they are currently moving, then further rate cuts would be appropriate."

Not all Fed officials believe that the task of fighting inflation is accomplished. Fed Governor Bowman mentioned the risk of a rebound in inflation in the coming months: "In my view, upside risks to inflation remain prominent, and global supply chains remain vulnerable to labor strikes and increased geopolitical tensions, which could lead to inflationary effects in food, energy and other commodity markets. Expansionary fiscal spending could also pose inflationary risks, given the long-term limited supply, especially increased demand for affordable housing."

The next FOMC meeting will be held on November 6-7, a few days after the US election. "While the headline of the data is always important, incoming labor market data will need to provide greater confidence to confirm that the Fed's slowing trend has stabilized," Matthew Luzzetti, chief U.S. economist at Deutsche Bank, wrote on Wednesday. So there are two dates to watch: October 4, when September employment data will be released; November 1, the date of the October employment report, which is in the pre-FOMC quiet period. Luzzetti believes that if the unemployment rate exceeds the FOMC's median forecast of 4.4% at the end of the year in the September dot plot, and non-farm employment growth remains at 100,000 per month or less, then another 50 basis point rate cut in November will be a topic of discussion. The market is betting on another 50 basis point rate cut in November, and Wednesday's federal funds futures pricing shows that the probability of another 50 basis point rate cut on November 7 is about 60%. (Jinshi)