On September 19th, at 2:00 am, the Federal Reserve announced a 50 basis point rate cut, lowering the target range for the federal funds rate from 5.25% - 5.50% to 4.75% - 5.0%. This officially marks the beginning of a loose monetary policy cycle in the United States. This rate cut is the first since March 2020, and the market generally believes that the opening of the rate cut cycle is beneficial for risk assets. After the announcement of the rate cut, various assets, including BTC, gold, and US stocks, all experienced varying degrees of gains.

The Federal Reserve will cut rates by another 50 basis points this year, and concerns about economic recession persist

The Federal Reserve's dot plot shows that it is expected to cut rates twice more this year, totaling 50 basis points, and to cut rates 4 times in 2025, totaling 100 basis points, and 2 times in 2026, totaling 50 basis points. The overall rate cut is expected to reach 250 basis points, with the endpoint interest rate at 2.75% - 3%. The magnitude of this rate cut exceeds the expectations of many Wall Street investment banks. Historical data shows that a 50 basis point rate cut has only occurred in emergency market situations, such as the tech bubble in January 2001, the financial crisis in September 2007, and the COVID-19 pandemic in March 2020.

Adjustment of macroeconomic data expectations, the Federal Reserve's confidence in curbing inflation has strengthened

Public information shows that the Federal Reserve has lowered its GDP growth rate expectation for this year from 2.1% to 2.0%, significantly raised its unemployment rate expectation from 4.0% to 4.4%, and lowered its PCE inflation expectation from 2.6 to 2.3%. The adjustment of the Federal Reserve's data expectations shows increased confidence in curbing inflation, and the labor market is also a key focus for the Federal Reserve. The significant initial rate cut and the relatively hawkish rate cut pace have provided overall short-term stimulus to the market.

The market's reaction to the Federal Reserve's rate cut has shown a polarization in the chain reaction it brings. It is currently unknown whether there will be an economic soft landing or an amplification of inflation and geopolitical risks. However, in the short term, market volatility and uncertainty will increase, and market trends will also become more complex. It is recommended that investors closely monitor leading economic indicators such as employment data and control risks.

Disclaimer: The market carries risks, and investment should be cautious. This article does not constitute investment advice. Digital asset trading may involve significant risks and instability. Investment decisions should be made after careful consideration of individual circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.

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