At 2 o'clock in the morning, Beijing time, the interest rate "boots" finally landed.
The Federal Reserve announced that it would cut the target range of the federal funds rate by 25 basis points to between 4.00% and 4.25%. This is the second interest rate cut by the Federal Reserve since December last year and the first interest rate adjustment in 2025.
The rate reduction is expected.
Job market becomes Fed's primary concern
In the market, the 25 basis points of interest rate cuts were expected.As the start of the U.S. monetary policy shift this year, the weak performance of the U.S. job market became the first consideration for the Fed’s rate cuts.
Federal Reserve Chairman Jerome Powell said at a press conference, "The current slowdown in the job market has become the primary concern of policymakers. The recent pace of job creation has fallen below the balanced level needed to maintain a stable unemployment rate, and any increase in layoffs may quickly push up the unemployment rate."
Non-agricultural data in August showed that U.S. job growth has stalled, with unemployment rising to 4.3 percent.In the past week, the number of U.S. first unemployment applications has surged to the highest level since 2021.
At present, the U.S. job market has seen multiple weakness signals such as rising black unemployment and shortened working hours.
However, the Federal Reserve did not opt for a more drastic interest rate reduction and in part reflected its concerns about inflation.In August, the annual inflation rate of the US Consumer Price Index (CPI) climbed to 2.9%, reaching its highest level since January this year.Powell said, “We must focus on full employment while focusing on inflation.”
The Federal Reserve’s “re-solidarity”
It is worth mentioning that despite previous differences within the Federal Reserve on the rate reduction, the rate reduction of 25 base points was passed by a high vote of 11: 1.
The only disagreement is with Stephen Milan, the newly appointed Federal Reserve Chairman and currently chairman of the White House Economic Advisory Committee, who has supported a 50 basis point interest rate reduction, becoming the only opponent of the Federal Open Market Commission (FOMC) statement.
Governors Bowman and Waller, who voted against at the Fed’s last meeting, this time agreed with Powell and other members.
In addition, the spot chart shows that for the year-end interest rate forecast, only one Fed official expects it to fall below 3 percent, significantly below the opinion of most members, analysts say that the forecast also comes from Milan.
According to Reuters, the result of this vote shows that for some time, Trump's efforts to "intervene" in the affairs of the Federal Reserve, including continuously criticizing the interest rate policy, appointing White House cronies to the Board of Governors, and trying to fire Federal Reserve Governor Cook, have not yet had a significant political impact on the Federal Reserve.
Regarding subsequent currency trends, in the context of U.S. job market risks, Powell hinted that the Federal Reserve may further cut interest rates at its October and December meetings to curb the weakness of the U.S. labor market.
On that day, the three major U.S. stock indexes were mixed, with the Nasdaq falling 0.33%, the S&P 500 falling 0.10%, and the Dow rising 0.57%. The US dollar index closed slightly stronger.
According to the analysis, the U.S. Federal Reserve is expected to heat up inflation in October, or will make the threshold of interest rates higher and higher, and the space for monetary easing will also be limited. The current U.S. economy is not on the side of demand, but on the side of supply. Excessive monetary easing not only can not solve the problem of employment, but may increase inflation, putting the economy into "stagnant inflation".
Editor: Yan Jiaxin
Editor in charge: Wang Shanshan