✅✅I think a 50 basis point cut is not impossible. Currently, the two expectations are balanced, which means there is still a lot of suspense. Even data from the CME's "Fed Watch Tool" shows that traders in the interest rate futures market have recently predicted that the probability of the Fed cutting interest rates by 50 basis points tonight is as high as 64%, while the probability of a 25 basis point cut has shrunk to 36%.
There are four scenarios for rate cuts:
1. A 25 basis point cut, Powell's speech is hawkish, suggesting that the subsequent rate cuts will be lower than expected;
2. A 25 basis point cut, Powell's speech is dovish, suggesting that the subsequent rate cuts will be faster;
3. A 50 basis point cut, Powell's speech is hawkish, suggesting that the subsequent rate cuts will not be too fast;
4. A 50 basis point cut, Powell's speech continues to be dovish, suggesting that the subsequent rate cuts will continue to be substantial
Scenarios 1 and 4 are less likely, and both scenarios will suppress the market. Scenario 1 reflects a hawkish rate cut that is significantly lower than expected, and Scenario 4 will be interpreted by the market as the economy falling too fast, just like the previous rapid decline in economic data caused a sharp drop in US stocks.
🔎Therefore, scenarios 2 and 3 are more likely, and the probability of scenario 2 may be a little higher. Only 25 basis points will be cut first, but then quickly make up for it, and other positive factors will be used to appease the market to avoid a sharp drop in the market.
The Fed will also release the latest Summary of Economic Projections (SEP), which covers Fed officials' expectations for the economy, inflation, and unemployment over the next three years. This will also include the famous interest rate dot plot. The latest SEP will include forecasts from 2024 to 2027.
The dot plot reflects the Fed's expectations for future interest rate cuts, and is also an important guide for subsequent interest rate cut expectations (there are still three interest rate meetings left this year)
✅✅These are some of my views on tonight's interest rate cut. At present, the market will not fluctuate too much, waiting for the interest rate situation. Bros can express their own opinions. Which scenario do you think is most likely?
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