The Fed cuts interest rates, and Powell finally gives in to Trump before stepping down. Last night, the Federal Reserve decided to cut the target range of the federal funds rate by 25 basis points to between 4.00% and 4.25%.
This is the first rate reduction in the Fed since December 2024.Only Mr. Miley, the newly appointed Chairman of the Federal Reserve, voted against the reduction of interest rates by 50 basis points, 25 basis points too little.
Why cut rates now? When the Federal Reserve decides whether to cut interest rates, the main focus for a long time has been inflation. As long as inflation is high, it will not cut interest rates in the past. Recently, the inflation rate in the United States has risen and remained at a slightly higher level. It stands to reason that Powell is unwilling to cut interest rates.
Trump has been dissatisfied with Powell since he took office, and has repeatedly called for interest rate cuts, and has repeatedly called for Powell’s dismissal. Though the Federal Reserve’s independence makes Powell not afraid of Trump’s threat, the Federal Reserve still needs to respect the President of the United States.
The Federal Reserve’s direct interest rate reduction is that new jobs have grown much lower than expected in recent months. Trump fired the Director of the Bureau of Labor Statistics due to poor employment data. Recent indicators show that U.S. economic activity has slowed in the first half of the year and employment growth has slowed. Economic outlook uncertainty remains, and employment downturn risks rise.
The Federal Reserve's interest rate cut is mainly a "preventive" action due to concerns about the slowdown of the job market, which is intended to guard against economic downside risks. A rate cut could help stabilize market sentiment and stimulate the economy in the short term; However, in the medium and long term, global capital flows, trade patterns and volatility in financial markets are likely to increase.
For U.S. stocks, the Nasdaq index rose from a low of 14,784 in early April to a high of 20,264 on September 15, mainly driven by technology giant AI investment and expectations of interest rate cuts.
The three major U.S. stock indexes closed mixed last night. The Dow Jones Industrial Average rose 0.57%, the S&P 500 fell 0.1%, and the Nasdaq fell 0.33%. The 25 basis point interest rate cut is basically within market expectations.
The influence of U.S. interest rate cuts on China. The exchange rate pressure against the U.S. dollar may be eased, providing more operating space for China's monetary policy. If the rate cuts boost U.S. consumer demand, it may increase the import of durable consumer goods such as Chinese electronics and machinery in the short term.
The rate cuts will also reduce the attractiveness of dollar assets, potentially driving international capital out of the U.S. to search for higher-return investment destinations, with emerging markets such as China likely to catch the flow of funds.
The influence of the Fed's interest rate reduction on China has been reflected in advance in China's general equity, and in recent years the general equity has continued to rise, and Alibaba's market value has doubled within the year, and has increased by more than 60 percent in a hundred years.
Last night, the Nasdaq China Gold Range Index continued to rise by 2.85%. in individual shares, Hurricane, Baidu Group increased by more than 11%, Parkhai Biotechnology increased by more than 10%, and data from millions of countries increased by more than 7%, Chiang Mai Technology, Land Control, and Uluru increased by more than 6%.
Since the beginning of this year, precious metals gold and silver have risen astonishingly. Gold rose more than 40% and silver rose nearly 50%. Gold continues to hit record highs, and silver has also hit a 14-year high.
Rising global geopolitical uncertainty and investor concerns about "stagflation" (high inflation and low growth coexist) have prompted funds to flood gold and silver for safe havens. Gold is particularly regarded as a "barometer" reflecting everything from central bank policy to geopolitical risks.
After the interest rate cuts landed, gold and silver rebounded. The future of gold and silver is still dependent on the trend of the global geopolitical situation, and the expectation of further interest rate cuts by the US Federal Reserve.
Interestingly, although Powell had to lower interest rates by 25 basis points under Trump’s pressure, he still couldn’t satisfy Trump.
“Powell cut interest rates by 25 basis points, it’s a genius...nobody has ever said that he’s a complete fool. He should drop 100 basis points, or 200 basis points. If I run the Federal Reserve, I’ll cut interest rates faster than Joe Biden, who is sleepy and eats ice cream. If you don’t have a brain, you can’t freeze your brain! Let’s speed up the pace, the next time you cut interest rates by 100 basis points, otherwise you’re fired!”
Jerome Powell's term as Chairman of the Federal Reserve will end on May 15, 2026, while his term as Chairman of the Federal Reserve will last until January 31, 2028.
Since Trump took office, he has been threatening to dismiss Powell.U.S. Treasury Secretary Bessent also said Powell would be better off as Chairman of the Federal Reserve at the same time after the end of his term as president in May 2026, in order to avoid causing "confusion" to the market.
Because of the independence of the Federal Reserve, the former chairman of the Federal Reserve was very respected, and the length of his term was more determined by himself. Greenspan served as chairman of the Federal Reserve for 19 consecutive years from 1987 to 2006.
If Powell can complete his term of office, he will have eight years. But Powell must be the most humbled chairman of the Federal Reserve in history. No one is abused by the president every day and threatened to be fired.